The August jobs report will be released on Friday morning at 8.30 am ET. This report is particularly important today for two reasons.
The first is that it is an important data point in helping to determine how fast the economy may be slowing down due to Fed interest rate hikes. The Fed has made it clear that it is going to take more than one data point to change the trajectory of their hawkishness, but today's jobs report has the potential to provide some optimism that things are starting to slow.
The second reason that this report is important is that it is a very convenient catalyst for a potential bounce after six days of selling after Powell's hawkish speech. The market is in a position to bounce regardless if the jobs report is hot or cold.
Ironically we are in an unusual situation where a weak report that shows that the economy is slowing is likely to be good news for the market. The Fed has made it clear that it is trying to slow down the economy in order to bring inflation under control. At this point, any indication of slowing means there is potential that the Fed will ease its hawkishness a bit faster.
Unfortunately, the Fed has been signaling that it anticipates that interest rates are likely to go higher and stay there for longer in order to ensure that inflation really is under control. One jobs report is not going to change much, but it may provide some short-term volatility for traders.
In market conditions like we have now, there is an intent focus on trying to catch counter-trend bounces. Not only do bulls want to put some money to work for quick gains, but bears want to lock in profits and then try to reenter at higher prices.
Counter-trend bounces are very tradable because they tend to be quite sizable and very abrupt. If you time them right, you can do pretty well even in the depths of an ugly bear market.
Don't forget we have a three-day weekend coming up, and the bears have had a good run. There will be an inclination for some short covering to close out the week, and the jobs report is going to be the excuse.
If the jobs report comes in hot and we sell off, I am looking for dip buyers to become interested very quickly. A cool number should get a positive reaction, and I'll be looking for some good support throughout the day. Stocks are grossly oversold, and the bulls have an edge for a short time.