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Sentiment Momentum

In short

Rate of change in sentiment — is the narrative improving or deteriorating?

Sentiment momentum measures how fast sentiment is changing. Rapidly improving sentiment (even if still slightly negative) can be a powerful buy signal. It's like watching whether a restaurant's reviews are getting better or worse.

Sentiment momentum calculates the rate of change in composite sentiment over a trailing period. Rising momentum indicates improving narrative even if absolute sentiment is negative. Sentiment momentum has been shown to predict returns over 1-4 week horizons.

Formula

Sentiment Momentum = Sentiment(today) - Sentiment(N days ago)

Related concepts

  • Sentiment Score — The sentiment score blends news and social media signals into one number. Think of it as a thermometer for how the market 'feels' about a stock right now. Positive = optimistic; negative = pessimistic.
  • News Sentiment — News sentiment combines the emotional tone of recent news articles about a company. Lots of positive headlines = positive sentiment. A string of bad news = negative. It can signal upcoming price moves before they happen.
  • Rate of Change (ROC) — ROC measures how fast a price is moving. If a stock was $100 ten days ago and is $110 today, its 10-day ROC is +10%. High ROC means strong momentum; a reading near zero means the move has stalled, and negative ROC means the price is falling versus that earlier point.