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Using the Evening News as a Contrary Indicator

By Jeff Clark
Thursday, August 31, 2006

The evening news is nothing more than a hype machine.
Today, the evening news is less about the facts and events than about boosting ratings. As a result, watching the typical network newscast is like watching a video edition of The National Enquirer.
Instead of the dignity and respectability of Murrow and Cronkite, we’re now treated to the perkiness of Katie Couric and the arrogance of Geraldo Rivera.
And the hype! Oh my goodness... the hype.
How many days did the news lead with ridiculous saga of the John Mark Karr arrest? It was apparent from the beginning this nut didn’t murder JonBenet Ramsey. His ex-wife provided the alibi that cleared him of the crime. John Mark Karr may be a despicable waste of human tissue, but he didn’t murder JonBenet.
Nonetheless, the media obsessed over Karr... so much so that we even know what he ate on the plane ride over from Indonesia.
I think we’re now at the point where we can bet against the evening news and make a lot of money. When the news obsesses over a story, the odds are pretty good it’ll pay to take the other side of the trade.
Take Hurricane Ernesto as an example... Er, I mean Tropical Storm Ernesto. Actually, I think it’s Really Big Dark Cloud Ernesto.
The media is desperate for a tragedy of any kind to piggyback on the anniversary of Hurricane Katrina... and they latched on to this weak storm formation in the Atlantic Ocean. Two weeks of newscasts were dedicated to watching the little orange, red and yellow circles on the Doppler radar... and how close they were to the oil rigs in the Gulf of Mexico.
Collectively, the news anchors wondered out loud...
“What will happen if the oil rigs are taken out?”
“What will happen if New Orleans is hit again?”
And then last Saturday, a depressed group of newscasters - like six-year olds who just learned there’s no Santa Claus – faced the reality that Ernesto was a harmless summer shower.
Oil prices, which spiked higher last week in response to the hype, sunk along with network news ratings points on Monday and Tuesday.
Traders who took advantage of the hype and shorted oil before the weekend were swimming in profits by Wednesday morning.
Need another example?
Go back to the August 22nd edition of GSW, where I wrote about the idea of buying the housing stocks ahead of the release of the new homes sales numbers. That trade was inspired by a Monday evening network newscast on the impending collapse in the housing market.
The new homes sales numbers were absolutely horrible... but the housing stocks were up on the day. And, they’ve rallied about 5% since then.
It’s safe to say that by the time the network news features a shock segment on any issue, stock prices have already discounted the “news.”
I don’t get my “news” from the major networks any more. But I do get quite a few good trading ideas.
Best Regards & Good Trading,
Jeff Clark

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Market Notes
S&P 500 nearing May highs.
The biggest stocks roll on... all large cap ETFs at new highs.
Beverage stocks at new highs... Coca Cola, Pepsi, and global brewing giant Diageo PLC.
Telecom rises... AT&T, Verizon, BellSouth lead the New Highs list.
Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%