The big economic news of the day was the big revision lower for third quarter Gross Domestic Product. Slower growth is a killer to budget forecasts and does not bode well for business confidence. Volume on the day ran lower, very typical for the Thanksgiving holiday week. Institutions weren’t out selling, but the weak price action is as of late continues to point to lower prices. A brief rally did provide a bit of hope for bulls, but it was all for naught. The trend remains down and it will take massive institutional support to turn it around.
After the market close the Fed announced another round of stress tests for banks. Remember Europe’s stress test in the spring? It said Dexia was the strongest bank in Europe…yes Rick Perry: “oops.” Even after our stress tests look at our banks, BAC is down more than 50% on the year. This new stress test is utterly ridiculous and will end up prove useless. This shouldn’t be construed as a bearish tint; price and volume will determine what side of the market we’ll be on. You can bet we’ll be on the RIGHT side.
There really isn’t much to derive from the action today other than the trend remains down. Opinion doesn’t matter even if the argument sounds good. If it sounds good, it is probably too good to be true. Most people want to be told a bed time story, a feel good story to make you feel comfortable. Trend following deals with facts, the truth and does not fall victim to a bedtime story. Stick with a rule based trading system and follow the rules!
