Today we have more jobs data and they point to weakness.

PRE-OPEN MARKET COMMENTS THURSDAY – The market has been trapped in a trading range that is within striking distance of the all-time high. Tuesday the market dropped and yesterday it recovered those losses. Traders are squaring up ahead of the jobs report tomorrow.

JOLTs showed that job openings fell to the lowest level in a year yesterday. This morning Challenger, Gray & Christmas showed that there were 23K more job cuts in the last month. Today ADP reported that only 54K new jobs were added in the private sector last month (73K expected). Furthermore, initial jobless claims jumped to 237K (230K expected). All of these reports point to a weakening job market and the Unemployment Report will be posted tomorrow.

ISM Services will be posted 30 minutes after the open today. Last month it fell to 50.1 which is almost in contraction territory. Almost 80% of our economic growth comes from the service sector and as a survey, I consider this to be a timely data point. ISM Manufacturing slipped to 48.7 and that is in contraction territory.

With all of this terrible news the market must be down – right? No. The futures slipped 10 points from the overnight high, but they will still open in positive territory. A weak jobs report tomorrow will increase the odds of a rate cut by the Fed in two weeks and that is all the market is focused on. Bull markets die hard and it is going to take continued weakness over a few consecutive months before the market worries that the Fed waited too long. That timeline coincides with seasonal strength into year end.

The market has been able to weather a poor employment report in August, a weak ISM Services number and a very hot PPI (.9%) in the last month. I was a bit surprised by the resilience and it tells me that we might not get the nice drop I would like to see in September and October. If the market muddles around for another month we are likely to see volatile conditions into year end with some pullbacks and tall bounces. I would prefer to see a nice swift move lower and then a nice year end rally. Both scenarios would finish roughly at the same level, but the later is easier to trade.

With stock valuations at lofty levels and with global economic weakness spreading to the US, I have little doubt that this bullish trend is going to face very stiff headwinds. The good news from a trading perspective is that I believe we will start to see volatility that lasts a few days. That is a much better environment than what we have seen the last two months where the moves barely last a day. We need to get out of this compression and we should see movement between the 50-day MA and the all-time high into year end.

Overseas markets were up slightly with the exception of China. This is likely to be a choppy session ahead of the jobs report. If ISM Services falls into contraction territory (< 50) today, it could spark some selling. That would add to the negative releases we’ve seen this morning and we could see some nervous jitters ahead of the jobs report. Traders are not going to place big bets ahead of the BLS and who knows, a bad jobs report could rally the market (bad news is good news).

Keep it light today and let’s see if we get some directional movement. Volume is the key. We need good volume to generate sustained movement today.

The low from yesterday is support and the high from Friday is resistance. I expect to stay well within that range today.