No surprise GDP growth was in-line with estimates as pending home sales jumped more than expected. Both figures failed to ignite buying as the market hit the day’s low just before 11am. Once again buyers stepped up to the plate supporting the market. Support wasn’t ferocious as volume registered lower than yesterday’s pathetic levels. Volume just isn’t there during the final week of the summer. Institutions are not stepping up and putting their money to work in front of Ben Bernanke’s speech in Jackson Hole. While the price support is positive it is very difficult to have much conviction in the market in either direction.
According to MarketSmith’s shorting data we continue to see the NYSE Short Interest hitting 5 year highs. Are we simply seeing a massive short squeeze? Or is the SMART money right and a pending collapse is about to occur? It is anyone’s best guess here which way the market goes. Quite frankly it is much easier to doubt the market with all the potential headwinds the market faces. China, Europe, and the Fiscal Cliff can easily be used to make a bearish case. Despite the argument and from a trading perspective when do you exit your losing position? How much do you risk? Trend following is powerful because it cuts through the fundamental non-sense and positions you to what matters most: PRICE.
With very little happening in the market there have been bright spots and opportunities for BWT to exploit. The last thing we want to do is miss a signal. Missing signals decreases your opportunity to capture upside and why it is so important not to argue with your system. Follow it and do not let your opinion get in the way of your trading. You’ll be surprised how much more success you’ll have by not ignoring trading signals.
Remember always know your position sizing, entries, and exits! Cutting losses is your insurance policy and your number one rule!