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What The Media Isn't Telling You About Yahoo!


The real story of the day isn't about some CEO's paycheck; it's about yours.


I'm sure that today's big story will be reported among financial media, but I'm doubtful they'll catch the one angle that can most impact today's trading decisions. And even if they do, they're not likely to mention the recently completed retracement that should keep the situation relevant after today's news has gone stale.

Chartist, or not, it's usually helpful to start the day by finding one or two high-profile situations that might define the session.

I'm not referring to stories that Financial TV might highlight two times an hour - like, "Just how big was Nardelli's bonus and severance when he left Home Depot? Inquiring minds want to know!" Traders and investors that focus on those stories will eventually relate more with the severance than with the bonus. The boardroom drama of the day reflects what is of interest to media. That doesn't help you predict how that day's market drama will unfold.

Perhaps the best example is earnings reactions, such as Intel's (INTC) announcement after last Tuesday's close. The open's drop was widely reported and dissected by statistics including the precise percentage loss up to the latest millisecond. But what was really interesting was that the stock didn't just drop - it dropped under a 2-day old low. True, this observation isn't as erudite as earnings comps from last quarter or last year. But it's more useful because it predicted the stock wouldn't recover that day, not through the session's last millisecond.

Since the drop followed the prior session's new relative high, the reaction represented a substantial shift in perception. INTC is a high-profile stock, so the prior session's perceptions were to some degree a function of the broader market, and the sudden sentiment shift would impact the broader market. In fact, NDX and S&Ps alike were under pressure throughout the day last Wednesday.

Which brings us to today's news, Yahoo!'s (YHOO) earnings. The earnings are old news by now, but that won't stop the media from slicing them a dozen different ways for comparison to a dozen prior periods. Less noticed or unnoticed entirely is the initial after-hours reaction that is more recent but more obscure - especially one detail that the media will discard as a non sequitur, and another detail that won't even be considered:

YHOO's initial reaction included a half-hour spent trading at a loss before surging more than 2 points into the after-hours close. The loss didn't surprise anyone that was focused on the six-day loss underway. At less than 1 point, the loss was relatively muted considering it was also a reaction to news, which should have been a clue that the loss wouldn't hold. In fact, YHOO surged more than 2 points into the after-hours close. YHOO's six-day drop completed a 61.8% retracement of January's earlier rally, which is the most interesting fact.

Guess which of these factors is focused on, and which isn't likely to be reported. This morning's pre-market trading has gapped down. The gap is likely to be recovered, and not because of a story that reports YHOO's earnings from an angle not previously viewed. And since this high-profile stock has suddenly reversed a recently well-entrenched opinion by a meaningful degree, the session's broader market implications should provide a benchmark for determining market health.

Relevant price action and reaction in a high-profile stock can affect its sector and offer clues to predicting the broader market . Whether you trade individual stocks, ETFs, indexes or S&P futures, the real story of the day isn't about some CEO's paycheck; it's about yours.
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