Stay Ahead. ADP Payroll Reports Tomorrow!

Stocks surrendered morning gains and are trading flat into midday Thursday. The S&P 500 up .60 points to 2100.33 and 9 points from session highs.

Treasury bonds are seeing a second day of modest weakness on better than expected jobless claims numbers and ahead of monthly payroll data Friday morning. The yield on the benchmark ten-year is now 1.4% and up from record closing lows of 1.37% a couple of days ago.

Crude oil is off 90 cents to $46.53 and gold snapped a six-day winning run after losing $9 to $1358.

Six of ten market sectors are higher on Wall Street, led by Basic Materials (XLB), Industrials (XLI), and Consumer Cyclicals (XLY). Utilities (XLU) are seeing notable weakness.

CBOE Volatility Index (VIX) touched a three-week low of 14.33 and is down .05 to 14.91.

Meanwhile, overall options volumes are a bit lighter than normal. 3.3 million calls and 2.7 million puts traded across the exchanges in the first two hours. Projected volume for the day is 14.1 million contracts and 15% below the one-month average, which is now 16.3 million contracts.

SPDR 500 Trust (SPY) Aug 125 puts, SPDR Financial (XLF) Jul 23 calls, and SPDR Gold Trust (GLD) Jun2017 144 – 172 call spreads are the most actives.

Looking forward, the focus turns to monthly payroll numbers tomorrow. ADP offered a sneak peek at the situation in June after reporting this morning that the economy added 172,000 private sector jobs last month. Economists were expecting an increase of 152,000. Tomorrow’s data are expected to show that 175,000 jobs were created and the rate of unemployed remain unchanged at 4.8%.

Given the recent anxiety about Europe, the global economy, and the upcoming earnings reporting season, the equities market is likely to find solace from stronger-than-expected data and sell-off if Friday’s report is much weaker than expected. The chart below shows the seesaw action in the iShares Small Cap Fund (IWM) in recent weeks ahead of the report.

See Tradespoon’s Stock Forecast on ISHARES TR-RUSSELL 2000 ETF (IWM)

Tradespoon’s Stock Forecast on ISHARES TR-RUSSELL 2000 ETF (IWM)

Trading under the ticker IWM, the exchange-traded fund holds the same companies as the Russell 2000 Small Cap Index (RUT) and shares can be bought and sold like shares of individual stock. The ETF also has listed options, which are among the more popular contracts among institutional trading shops today.

Notice that shares of the Small Cap ETF fell sharply in the two days after the UK referendum, but successfully held the mid-May lows. From there, the ETF saw an aggressive rebound and “filled the gap” on the chart left by the move on June 24th.

The ETF is now well above a 200-day moving average and successfully tested the 50-day MA Tuesday and Wednesday. $114, $112.75, and $112 are also areas of short-term support. Resistance at $115, $116, and $117.50. As for the S&P 500, it is again testing the 2100 level with support near 2090, the 50-dauy moving average, and 2075. Resistance continues around 2110, 2115, and 2020.