(By Rich Bieglmeier) The NASDAQ, Dow, and S&P have three different chart images. The NASDAQ is flatlining, the Dow steadily moving lower, and S&P slowly drifting downward. With the indexes doing their best Yosemite Sam, "He went dat-a-way" impression, it is hard to get a read on which is pointing the way.
Although, as i On the Market readers know, iStock likes to key off the action of the NASDAQ. Typically, investors fare better when the tech heavy index leads. Right now, it's doing the best job of hanging in there while the rest of Wall Street meanders lower.
The race is on for the NASDAQ to break 3,100 before it falls below 3,025. Computer trading models are likely to take stocks in the direction of the winner.
That direction could get a little push before the market opens on Thursday. Prior to the bell, the ADP Jobs report will give investors a taste of what they can expect from Friday's Employment situation report. The last few ADP reports have been reliable precursors for the more important BLS report.
Economists believe ADP will show a gain of 149,000 jobs, which is lower than July's 163,000. The consensus range is 90,000 to 165,000; so, it seems there is more downside than upside according to forecasts. Based on recent trends, iStock anticipates a result that is in line with expectations.
Jobless claims, on the other hand, have been trending higher the last few weeks. iStock feels the upswing will continue, especially with the end of the back-to-school shopping season. The consensus is for 370k new filings. iStock sees a tally closer to 376,000, with last week's number revised higher, again.
It's important to remember that jobs are a lagging indicator. Many leading reports, like ISM manufacturing and Durable Goods Orders, are pointing the way lower. The market knows this too. An upside surprise for Jobless Claims and ADP might not generate the response you would imagine. However, a bad miss could actually ignite stocks as the Federal Reserve has said jobs will be a major factor in determining policy.
A horrible showing from Thursday's and Friday's employment announcements could give the central bank the political cover (doubtful) to enact QE3 next week. At least, that will be the reasoning behind stocks rising on poor reports.
We'll be keeping an eye on the NASDAQ targets we mentioned above as the algorithms respond the headlines in the next few days. iStock will be ready to react accordingly and share our thoughts with you as events unfold.