“It’s A Price, Not An Address”

The title is something that one of my first bosses always used to snap when a salesperson complained that he was quick to change a quote; there are plenty of cross currents in the market at present, and prices do change. Stops can be helpful, as can a degree of flexibility. Having a thesis is generally a good thing, but a thesis that prevents a rethinking when faced with new evidence, particularly from the charts, can be expensive.

We’re very much oriented toward the intelligent application of technical analysis as taught by Todd Mitchell here, but it’s also not a bad idea to keep half an eye on the news, since traders and subsequently the charts responded dramatically to headlines this afternoon. To recap, we had pretty lousy earnings this morning from BAC and GS, in particular, and the consensus view of the European situation was, to be kind, that it continues to be in a muddle. Or something.

Earnings, of course, are backward looking, and there’s a sense in the case of financials that enough hits have been taken to clear the way for better comparisons going forward. I don’t know if that will prove to be correct or not, but financials, which looked set for the abyss, actually had quite a good session. There is talk around of a general agreement between the Feds, the states, and the banks that will permit closure of the mortgage issue on that front, with a total tab of $25 billion coming up in conversation. Having to fork over $25 billion is hardly cause for celebration, but the great killer of stock multiples is uncertainty. The banks will, no doubt, figure out ways to make money, and if their exposure to the regulators on this issue is capped, they will begin to look more attractive, if not necessarily alluring.

The Guardian, a respected UK newspaper with a leftist slant, reported that France and Germany – more accurately, Germany and France – have managed to put together a potentially workable plan to put a fence around Greece, provide support to Italy and Spain, and recapitalize the region’s banks. This really got the Euro flying this afternoon, with equities following in the wake of the FX market. Dow Jones later threw cold water on the report, and Moody’s subtracted from the mood, so to speak, by piling on and downgrading Spain. The end result is that nobody whom I’m acquainted with has more than a moderately informed view as to what European officialdom will do this weekend. I’m inclined to be more than a bit jaundiced about their efforts, but I have to admit that things are dire enough that there’s just a a chance that a plan will emerge.  Any resolution, by removing uncertainty, is likely to be positive for stocks.

Then there is Apple, which for once underperformed the typically lowball estimates offered by the analyst community. Apparently, people were well aware that a new iPhone would be available in October, and, sensibly enough, didn’t buy all that many of the existing models in September. Mark one up for the informed Apple consumer ecosystem. The conference call went reasonably well, so far as I could tell; Tim Cook is a sensible and capable sort who entirely lacks the charisma of the late Steve Jobs, but then, so do almost all of us.

There are plenty more earnings reports due in the coming days, plus the summit in Europe this weekend, and, lest I forget, options expiry. There will, no doubt, be plenty of opportunities, but one trader’s gain is another’s loss, and it seems like a pretty good week to be flexible rather than stubborn, even if being flexible means keeping stops in place, just in case some newspaper headline gets people energized in the wrong direction. Best of luck.