Despite the recent and apparently bullish tone to equities, the market seemed to be unable to hold faith slipping amid renewed economic fears. Momentum seemed to build rapidly in the face of analyst reports of the potential recovery being underway, but as the market heads into early fall it has already dropped through previous areas of support. The next few days – and especially Friday’s payroll number – could hold the key to whether or not this is a correction or if the market is turning.

Yesterday delivered a positive ISM manufacturing index number of 52.9 percent in August. This marks the first time in a long time that the index managed to top the 50 percent level.1  The non-manufacturing index number will be out tomorrow. This report – and the positive housing data just released – begs the question: Are these numbers improving because the economy is improving? Or were sales and manufacturing picking up because people believed in the stories of recovery or “green shoots”? The distinction may just be more fuel for this latest drop when combined with the latest jobs data.

The latest Automatic Data Processing (ADP) information shows another drop of nearly 300,000 jobs. Employment losses may not be occurring at the same pace as they once were (a detail noted by some analysts), but they are hardly over. The fears which accompany the uncertainty over job security or the inability to find a job amid overwhelming numbers will likely continue to impact the average consumer; and in turn affect the broader picture.

If the Labor Statistics release on Friday is worse than the anticipated 233,000 jobs predicted by a Dow Jones’ survey, it would not be unlikely for the market to return to the 950.00 area before renewing buying interest. Bond prices are going up at the moment despite low yields as unnerving disconnects in economic reports seem to compel people to put their money in perceived havens. The VIX has also climbed, indicating that this month – like last September – may be viewed as potentially ripe for downside volatility.

Past Performance is Not Indicative of Future Results.

Past Performance is Not Indicative of Future Results.

Disclaimer: Futures and options trading involve substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results.