Stock Price and Social Sentiments

I was on MarketWatch site last week and was pleasantly surprised to see that the site now shows Social Sentiment as an official indicator. I googled and found that this was launched around Q2 of 2013. The company-specific social sentiments are shown on the quote pages (try searching for a ticker symbol).  I pulled a 6 month graph on CSCO (Cisco Systems Inc.) to study.

social sentiment graph


Per MarketWatch, ‘social buzz’ in grey bars depicts volume of Twitter mentions about the stock and ‘sentiment’ depicts bullish/bearish sentiments associated with those mentions. The ‘velocity’ metric  is the current buzz within the market about the stock.

We see two such bearish peaks for Cisco in the graph. First one is around 8/13/2013, when the company announced to cut 4000 jobs, and second peak is around 11/14/2013 after Yellen hearing. Cisco’s prices had dropped by 7-10% in these periods. The example echoes MarketWatch’s theory that there is a strong correlation between social velocity and price volatility.

In case you were curious, social sentiments for Dow, S&P 500 and NASDAQ, can be found on MarketWatch’s market pages.