Drudge Headline Indicator (DHI)

I’ve never liked the Investors Intelligence Sentiment Index or any of the other common sentiment gauges.  They’re all old and busted and of very little use.

Matt Drudge is a true American success story.  Regardless of whether you agree with his politics, Drudge is a tastemaker and a one-man editorial board driving the national conversation.  He’s the soundboard for America and therefor the ultimate sentiment indicator.  When Drudge is bearish, then the average American is probably feeling pretty pessimistic about the prospect of higher equity prices.  Likewise, if Drudge ever gets bullish, watch out below.

Drudge is a sensationalist — a man of great flamboyance and flair.  In order to calibrate yourself to the DHI, you need to know the exact brand of hyper-bearishness to look for.  Expect all of these themes to be in play at the next market bottom: 1) Foxconn Rumored as Bidder for Large Domestic Dow Component; 2) Unruly ‘urban’ melee turns fast food restaurants into war zones; 3) Soros/Putin/Castro/Jintao etc celebrate dollar destruction; 4) Former Merill Lynch boss: Great Depression a ‘walk in the park’ compared to what’s coming.

We’ve already given up important support and the markets are probable to auction lower at this point.  Pay attention to what he has to say if we hit 1250 in the $SPX.  It will be deafening.

Here are some classic headlines:

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