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Will Support Levels Hold?

Stock futures were pointing lower pre-market Wednesday given a round of softer than expected economic reports out of Europe. On top of that the ADP Employment came in with 19% fewer jobs added than expected. That caused stocks to retest support at 2050 early in the session.

Shortly thereafter that frown was turned upside down thanks to strong services data. There was no denying improvements in both the ISM and Markit PMI Services reports which showed ample increases over last month's readings. Forward looking indicators were also a plus.

Unfortunately amongst the weakest areas of these announcements were the employment components. That makes sense given the soft read in the ADP report. It will be interesting to see if the Government version of this report on Friday shows the same declining trends. This is especially important given how so many bulls have pointed to employment strength as a reason to buy stocks.

At the end of the day, the S&P closed very near the 2050 support level. Even more auspicious is to note that both the Russell 2000 and the Dow Jones Transport Average are now below their 200 day moving averages for the first time in nearly a month.

Now is an important time for the market. Will support prove ample and we soon retest a breakout above 2100? Or will the bears continue to gain the upper hand and push stocks lower and lower? I sense that the Government employment report on Friday will play a large part in answering these questions.

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