Tuesday, August 21, 2007

Is This Blog a Sentiment Indicator?

I've been noticing something interesting. Over time, traffic to this blog has grown rather steadily, but a decreasing proportion of the traffic has been coming from other websites. Indeed, my most recent analysis of traffic stats shows that 7.4% of visitors come here from my personal site. Another 4.3% come to the site from a Google search. I get .7% of visitors from my Twitter page and less than half a percent from any other source.

What this suggests is that, when the traffic numbers vary from day to day, it probably has little to do with other sites linking to mine. As much as I appreciate those links, by and large they account for a small proportion of the people coming to the site. Instead, what I'm finding is that market conditions seem to account for much of the daily variation in traffic. That raises the possibility that blog traffic may itself be a sentiment measure.

Specifically, when the market has been more volatile--especially to the downside--traffic has spiked higher. When the market has been relatively quiet--as it was prior to the recent decline and as it was in today's trade--traffic has been subdued. The traffic to the blog went noticeably lower after the Fed intervention and subsequent rally.

I don't think there's anything special about this blog that would make it a sentiment measure. Rather, I think that, in times of uncertainty, it is human nature (and coping) to seek out information. Because TraderFeed is updated frequently--particularly with the Twitter posts--it is one source that active traders might turn to. It wouldn't surprise me if other frequently updated blogs and websites experienced similar ebbs and flows based on market conditions. I notice, for instance, that Bloomberg's website has experienced a jump in traffic in recent weeks, as measured by the Alexa stats.

I would be interested in hearing from other bloggers and site managers to see if they've noticed something similar. I suspect, for example, that search traffic to such financial sites as Instant Bull might be sensitive to market conditions. Major financial portals might also experience enhanced traffic at times of high market uncertainty.

I'm not sure if there is trade-worthy information in these traffic variations, but it's something I'll be keeping an eye on. If there does seem to be information amidst the traffic noise, I'll be happy to post my real-time observations.


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Aaron said...

I can confirm this from my website, www.researchlabtrading.com. My sign-ups go up for both my free weekly email and my paid memberships when the markets get volatile and we see large sell-offs. I have actually used this as a sentiment tool and have commented on it with members.

DayTrading said...

I have for a few years kept an eye on this factor with www.mypivots.com but have only noticed a slight correlation. If you have a list of dates and a volatility number associated with each date you could send it to myself and aaron and we could drop it into excel with our traffic figures and run Excel's correlation function against the two columns and this should give us a good indication of how correlated any single piece of market information (such as volatility) is to our traffic. You can email me at guy@deltat1.com - I'm just wondering what other market information can be compared to traffic - you've got me thinking now - excellent blog post! Although I've "kept an eye" on this in the past I've never actually measured the relationship.

DayTrading said...

I ran a correlation in Excel and posted the results here: http://www.mypivots.com/forum/topic.asp?TOPIC_ID=2207

Ofir Amitai said...

i can confirm this from a trader point of view. Whenever the market become volatile I look for encouragement from other traders. Having said that, I believe it is a mistake. One sould be consistent with its trading method and avoid changing his opinion on trade direction as soon as volatility starts to kick in.

weightoftheevidence said...

Bloomberg's traffic has gone up partially because they finally put up a great website ... the prior iterations have been very,very, sad representations for that company.

THT said...

What about this as a indicator of major turning points, the Comments increase. I have noticed this on stock forums mostly and on my blog. Idea being that at tops many are in the market fully invested and have nothing more to do. At bottoms a lot are out but to scared to get back in and have nothing to do but post comments about what they think just happened.

Michael said...

Yep, my traffic swells when the markets get volatile (to the downside!). Both Barry Ritholz and I posted on our blogs that we hit record traffic levels during the big February drop.

I also get a kick out of seeing what search terms bring people to my site. When I see people arriving from searches like "stock market sucks" (I have a post titled something like that) I know we're near a bottom. I've blogged about that kind of stuff several times.

David said...

I do not remember the blog that recommended a post of your's but I came via another blog site and plugged traderfeed.blogspot.com into favorites immediately.

As an old ad salesman will tell you, it's 'who' you reach and not 'how many' that counts.

Many people use Google reader, Netvibes, or Technocrati to save time more and more but I keep my true favorites in a small file and show up expecting something good regularly. Marketing may be changing in the new media environment but branding will never change that much.
Thanks for being a favorite
Dr.Brett. Dave

heywally said...

You'd probably get a similar read from the VIX movement ...

The InstantBull Team said...

Brett -- I appreciate your mention of InstantBull.com as an example, I think there's a strong case to be made here. I agree that it is difficult to factor out traffic that has been directed from other sites – but it does appear that not only do our unique visitor stats correlate with market volatility (i.e. up OR down spikes), but our daily "popular ticker search" stats often ebb and flow for tickers in volatile sectors.

These ticker trends are updated automatically on our "Hot" tab section (currently on a daily basis, see top left of InstantBull) and we allow one “vote” per ticker per IP address per day (with some additional protection against abuse). Not a scientific measure, but since many traders look at changes in volume as a predicting indicator for changes in price, it makes sense that prior to these changes in volume, traders make their decisions based on search and research - and some traders no doubt place too much emphasis on what they overhear on InstantBull’s message boards :)


T. said...

Not a blogger, but a side comment about the traffic source statistics. It may be that you have high retention rates, but gain *new* readers through other sources linking to your website.

I'll a personal example. once I am familiar with a blog and visit it daily, I do not follow links posted elsewhere to that blog, as I know I will read it at some point during the day. It is the blogs I do not read daily that I visit through links on other resources.

Incidentally, I started reading your blog through repeated references from a few other blogs that I read (Kirk Report, TrakerMike, Abnormal Returns). It was an interesting process because, at first, I couldn't relate to the content on the website due to its very short-term trading bias (especially back then, it has broadened since). As I was exposed to repeated mentions, I started reading more thoroughly and realized how valuable and enlightening your content actually is, regardless of time-frames.

Thanks again for doing this.

Brett Steenbarger, Ph.D. said...

Thanks for the many, excellent comments and perspectives. I've also heard by email from some site managers re: the same phenomenon: traffic going up in times of market distress. That's something I'll be tracking going forward.


Brian said...

hey Brett,

i just saw this post...thought you might find this interesting http://alphatrends.blogspot.com/2007/08/interesting-blog-traffic-to-stock.html

keep up the great work

Brett Steenbarger, Ph.D. said...

Hi Brian,

Thanks for passing along; very insightful post--