With the bulls and the bears basically at a stalemate right now, coupled with the fact that most folks want to hear what Greenspan has to say later today before doing anything, there's not a major market theme to look at with this column. So instead, we'll lay out a handful of smaller ideas. None of them would make a complete column by themselves. Together, though, we hope they'll help everyone regroup in front of a likely rate change, and the aftermath of the Fed's decision.

GDP

On Wednesday, the Q1 Gross Domestic Product was revised to 3.8%. That just means that the annualized rate of growth during the first three months of the year came in much better than the initial estimates of 3.5%. The market was supposed to like the news, as it means that the economic expansion was still strong. Of course, that's good for stocks, right? Well, not quite. Quite frankly, I'm surprised that the media still draws such a strong link between historical economic data and the future of stocks. Most traders and investors have figured out that any correlation of the two is minimal at best. Don't get me wrong - economics is a factor in corporate earnings, but the timing is all wrong. Stocks are either (1) predictive, moving higher months in advance of 'proof' of economic growth, or (2) reactive, with a major lag. That just means yesterday's big GDP number doesn't mean that right now is necessarily a great time to get bullish. Kudos to those who didn't get lulled into stocks based just on that announcement.

My other frustration with the news release......it was for the first quarter. Folks, we're starting the third quarter tomorrow. Even if the market and the economy were synchronized, the data is three months outdated at best. If there was a real trading or investment opportunity based on economic growth back then, that ship has long since sailed.

That's not to say that the news can't spark a decent trade. There's always some sort of reaction to important news. It just might not be the logical one. We're finding that, more and more, this lagging economic data is great for volatility traders, but a little pointless for buy-and-hold portfolios. The reason we bring it up at all is just to remind you to keep it all in perspective the next time a major announcement is made, aside from today's potential rate increase.

Consumer Confidence

On Tuesday, the Conference Board announced that the Consumer Confidence Index came in at 105.8 in June - a three year high. I'm glad the data was timely (very timely, in fact). However, some of the same issues we saw with the GDP data exist here as well.

This is basically an exercise in contrarianism. For those who may be new to us (or new to the idea), we're contrarian analysts. That just means that we take sides opposite of the 'logical' ones....and we're always in the minority. It's a philosophy not without its ups and downs, but we've found it to be the right point of view much more often than the wrong one. That's why we're far from bullish about this allegedly bullish level of consumer confidence, at least as far as stocks are concerned. If anything, this optimism is just a setup for a healthy humbling of the market.

Any historical instances where high consumer confidence was not good for the market? Yep - about five months ago. In January, the confidence level topped 105, and stocks topped out right at the same time. It was definitely not a great reason (or time) to get into the market. If anything, the consumer confidence figure was a reflection of the red-hot market we saw in November and December of last year. When confidence hit that extreme level afterwards, the market pullback was only a few days away. We think this recent high reading may yield similar results.

Again, the inaccurate cause/effect model is the culprit. High confidence levels probably are justified right now, but that's economic data (actually, it's sentiment data). That sort of information isn't predictive for stocks, except for the potential use as a contrarian indicator. So, don't assume stocks will rally based on the news.....the stock rally from May is most likely what led to the high June confidence reading.

Reaction Is The Key

Later today, we'll probably have yet another 1/4 point rate hike handed to us. Is this bullish, or bearish, or neither? I'd say the actual rate change is much less relevant than the reaction to the announcement is. In almost all cases (including this one), investors see what they want to see in the news. I've seen stocks rally on bad earnings, and I've seen markets tumble on strong economic data. So whatever Alan Greenspan decides today shouldn't affect your decision. Rather, how investors and traders respond to the data will clue you in about which direction they're going to take stocks. Follow that lead.

Now, that's not to say go long if the first trade after the Fed's announcement is an uptick. There's always going to be that initial post-announcement volatility. It really may not be until Friday when the entire market has tipped their hand. So, how we finish for the week will tell the tale. Investors are just waiting for justification to take whatever action they've probably already got in mind.

One Final Thought

Yesterday, J.D. Powers issued a news release that both Ford (F) and General Motors (GM) won a record number of long-term dependability awards for their 2002 models. Does anybody else see the irony in that? GM and Ford shares are probably the worst performing automobile stocks you could have owned over the last five years, but their cars the best autos you could buy.

The lesson to be learned is that great companies do NOT always make for great stocks. They should, and there was a point in time in our history when they would. But anymore, that's not the case. That's why we're technical analysts (chartists) instead of fundamentalists. General Motors and Ford can both make great cars, and are both capable of strong revenues/profits. By all accounts, their stocks should be rising. But, anybody who bought either stock based on the quality of the product (or the potential for profits) has basically had to live with some regret. You're far better off buying a rising stock of a lousy company than a falling stocks of a good company. That's why we use charts so extensively. Just food for thought.

Price Headley is the founder and chief analyst of BigTrends.com.