Google appears to be able to be used to predict stock market trends, but not how you might think.

The volume of Google searches for financial terms presages the stock market’s direction, according to research published in the journal Scientific Reports.

More searches for financial terms like “stocks” or “economics” indicates a heightened fear level that foretells a stock market drop, concludes a study by three economists. Fewer searches for those terms points to good feelings among investors and a rising stock market.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

The researchers examined 98 search terms using Google Trends, a weekly tool showing volumes and trends of search terms, and compared them against stock performance between January 2004 and February 2011. To determine the relationship between the volume of searches for a specific term and the direction of trader decisions, the researchers analyzed the closing prices of the Dow Jones Industrial Average weekly and compared how many searches were carried out for a specific search term relative to the total number of searches carried out on Google during that time.

“Our results suggest that these warning signs in search volume data could have been exploited in the construction of profitable trading strategies,” write the Tobias Preis of Warwick Business School, Helen Susannah Moat of University College London and H. Eugene Stanley of Boston University.

In other words, a stock investor watching Google Trends could have made a bundle.

In fact, using the search term “debt,” the best performing term, would have yielded a profit of 326 percent. A buy-and-hold strategy for the Dow would have produced a profit of only 16 percent during the same period.

More research is needed to find why people use a word like “debt” before selling stocks at a loss, the economists say. “It is clear that many opportunities also remain to extend our analyses to further financial data sets.”

Periods of concern about stock markets and the economy typically precede decisions to sell stocks at a loss. During such worrisome times, the researchers theorize, investors may tend to gather more information.

Combining financial trading data with search query volumes, they say, offers “exciting possibilities” for improving understanding of complex collective behavior.

Research that Preis completed in 2010 found that search volumes could be used to predict trading volumes of particular companies, but not their stock prices, notes writes David Leinweber in an article for Forbes.

What's happened since then?

Google Trends is providing more data and providing it faster, factors that give analysts more and better ammunition for predicting trends, Leinweber says. “In a nutshell, the data is getting bigger, by getting finer, and faster.”

Most economic indicators have lag times of at least a couple weeks, while Good Trends provides daily and weekly reports.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation