What We Can Learn from American Airlines (AMR)

Earnings season continued at a torrid pace, with
large cap stocks beating on revenues and/or earnings per share. The EU
finalized a bailout plan, and reports seem encouraging that Congress will
reach a budget deal soon.

We’ve had to suffer through a perfect storm of bad news since May. Now, we
seem to be getting a perfect storm of good news. Even the most recent
housing construction data was better than expected.

Unemployment, however, continues to lag. And as we’ve discussed at length,
there’s no reason to expect hiring to improve significantly, especially
with spending cuts coming at the federal level.

Are the Sellers Done?

So far this year, the S&P 500 has dropped 3% or more in one session 3 different times. The two previous times, it clawed back some of the losses over the following week. We’ll have to wait and see of there is any upside after yesterday’s big drop.   

 

The S&P 500 is now testing the lows from the “flash crash” on May 6. This is interesting because it was assumed that trading that day was something of a fluke as computer trading programs went haywire. But now that stocks are back to those levels, we must consider that the drop may not have been a fluke.  

 

The question now is: can stocks find some strength? Or perhaps a better way to ask the question is: are the sellers done?