The Trend of Trends

October 13, 2009 by
Filed under: Finances, Technology 

Google TrendsI was doing my stock research last night when I bumped into Google Domestic Trends. I know it is not new at all and it is really one of the things Google does best: manipulate data and make some sense of it. It cought my attention, though since one of the cardinal rules of stock trading is pick the right sector.
The way it works, it appears, is that Google (no surprise) keeps track of certain keyword searches and categorizes them into sectors of the economy. Then they create a chart that maps the trend of search, theory being that the search trend can be mapped to the sectors’ growth trend. For example. If you look at unemployment for example you will see the chart “hockey-stick” up towards the end of 2008. Nice! The value is normalized to 2004, so the chart says that unemployment searches have tripled since then. Has unemployment tripled too? Maybe not quite, but the trend is pretty clear, though.

The question is is the a leading or a lagging indicator? If we look at automotive besides the seasonality being tremendously obvious, it is no surprise that it popped above 1 from about .85 during the “cash for clunkers” program. This tells me it is a lagging indicator, pretty useless for investments. But don’t stop now!! What if now Google were to chart search for a particular ticker. Now we can predict how many people are investigating the stock. It will be safe to assume that most investors will investigate to go long as opposed to short we can see some potential trend in buying activity.

I haven’t seen the charts and I’m not ready to throw my money at a Google chart, but you have to admit it is pretty amazing what Google can put together. Are we in a new trend of technical indicators? The Rising Star, Bollinger bands, Google trends. Pretty cool!