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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