Welcome back, everybody. We hope you had a great weekend, and didn't dwell too much on Thursday's decimation. Yeah, it was a pretty harsh plunge, but it's not the kind of thing deserving of hysterics. Even if things deteriorate further from here though, we've got a basic plan and a lot of perspective... something the rest of the media seems to be unwilling to supply here. We'll explain exactly what we're talking about in a moment. First, since we didn't get a chance to look at the data on Friday because we were telling you about Hydrocarb Energy (HECC) that morning, today we need to carve out a little time and take a deeper look at July's employment picture. A Little Good and a Little Bad I know it seems like old news by now, being unveiled a whole whopping three days ago (a lifetime in the market), but we do want to take a step back and look at the whole unemployment picture for July. You probably already know the unemployment rate pushed a little higher last month, from 6.1% to 6.2% after a somewhat disappointing 209,000 new jobs were created in July. That's well short of June's 298,000 new payrolls. As for the details, 146.35 million people are working now, up 133,000 from 146.22 million workers at the end of June. Conversely, 9.67 million people are now officially unemployed, versus only 9.47 million unemployed folks a month ago. That's an increase of 220,000. So how was it we saw 209,000 new payrolls? Don't bother doing the math - the Department of Labor doesn't even care if all the numbers don't add up. But how do we add net payrolls and still get an increase in the unemployment rate? Because, while 209,000 people got jobs in July, 329,000 more people are now officially in the labor force and looking for jobs. The total labor force size grew from 155.694 million to 156.023 million in July. The bottom line is, while the employment picture is still technically strong, July's results are something of a red flag. Not only is the pace of job growth stumbling, the number of people looking for jobs seems to be on the rise. One more month of similar results could become a major problem for the market, even if only for perception reasons. Earnings Check-In Can you believe we're 71% of the way through Q2's earnings season? It's true! And, since it's been a while since our last earnings update, we have to devote a little time to you this afternoon to update you on where we are. As of late last week, the S&P 500 is on pace to earn $29.18 per share for the second quarter. That's 10.6% better than the year ago figure, but it's still shy of the $29.64 the pros were expecting just a couple of weeks ago. It's also worth mentioning the forecasts for the next three quarters were all reeled in a little. Now, I don't know if the waning earnings results is the root cause of the market's sudden weakness, but I'm certain it didn't help. We've mentioned before when traders are ready for the market to reverse, they'll find a reason. Likewise, if traders are not ready to reverse, the market is more than capable of ignoring all the cues to turn around. In any case, though I think we've showed this data to you before, it's worth laying out the S&P 500's per-share earnings forecasts through the end of 2015. It's the nearby column/table. We've also added the corresponding quarterly earnings-growth rate forecasts, just to give you a feel for how big the expectations are from here. Stocks trade based on where they're going as much as where they've been, but it may finally be becoming clear the market is going to have a very tough time actually meeting these lofty expectations. Yes, we were seeing growth rates in the high teens in 2011, but we were still comparing growth rates to the low-ball numbers created by 2008's recession. Things got back to 'normal' in 2012, and growth was tempered as a result. The question we all need to be asking ourselves is, what's going to happen over the course of the next six quarters that didn't happen over the prior six quarters? Clearly forecasters are counting on something significantly bullish developing between now and then. For reference, since 1989 the average year-over-year quarterly earnings growth rate is 7.2%, although the actual results for any given quarter tend to be much higher or much lower than the average. We've never seen strong double-digit growth like we're expecting going forward, however, except immediately after coming out of a recession... with the exception of 1999's crazy dot-com market. Of course, this is a longer-term idea, and may or may not have much bearing on what's apt to pan out in the near term. For that, you'll just have to keep reading. Setting Targets While I've got plenty of my own thoughts to share with you about what's next for the market, once again I find myself leaning on the thoughts provided to me by the SmallCap Network's John Monroe. We won't be able to tell you everything he said in today's edition of the EO, but we will be able to borrow a couple of relevant snippets. His first thoughts are: "The context of what we believe should take place at this point is actually pretty simple. I've included two charts here, a monthly chart of the S&P 500 and a daily chart of the same index. As you can see in this monthly chart here, the [indicator details removed by editor, but it's the blue line] sits at 1,893. Since this key indicator line on long-term thrusting charts are usually always a pretty tough nut to crack, I suspect the index will somehow find a way to rally off of that level, especially since it almost perfectly equates to a key retracement level, whereby we believe the index should stall to the downside on the daily chart... ...Does this mean that will be the absolute bottom on a near-term basis? No, but it would suggest at least the possibility of it and if for some reason it doesn't turn out to be the case, the index would have every right to find its way below our indicator..." Monroe went on to say: "When we drill down on a much more of a short-term timeframe, when you consider this daily chart of the S&P here, you can see the actual [Fibonacci] retracement levels I referred to above. I've drawn, once again, the 3/8 and 5/8 retracement levels from both the February and April bottoms to the index's all-time high. As you can see, the confluence area sits literally between 1,882 and 1,894, which is literally around that same [key] level on the monthly chart, so assuming we get there, there's plenty of context at this point to suggest it could be an area to start getting long at least a few compelling individual company ideas with some fairly tight stops in place, in the event the markets move even lower." Basically what he's saying is, 1893 - give or take - is his big line in the sand, though he's still expecting to see a little bullishness before that area is tested. He mentioned 1950, though he wasn't married to the target. Personally, I'd peg the 1960 area as the more meaningful ceiling since that level was turbulent area and floor between late June and mid-July. But, we're not going to split hairs over ten points for the S&P 500 index. We're both just saying there's a little more dead-cat bounce left in the market right now. The tank was never very full, however. Our next step from here is, do nothing. It shouldn't take more than a couple of days for the S&P 500 to retest the 1950/1960 area, if the market can even manage to do that. We believe stocks will peel back from that near-term peak pretty quickly, however, and the next time stocks fall they won't stop their bleeding so soon. What's interesting is how a dip all the way to the 1893 level would still only be about a 5.0% stumble from the high. Frankly, it's not enough to hit the market's reset button. We'll have to figure out if things are going to get any worse when that time comes. By the way, folks, if you want more specifics on how to trade the market's daily ebb and flow, we only scratched the surface in this newsletter. The SmallCap Network Elite Opportunity newsletter serves up much better details, complete with trading tips and instructions. If you want the swing-trade nitty-gritty, do yourself a favor and at least sign up for a free two-week trial to the SCN EO service. You read just some of Monroe's commentary today, and it made a big difference. Just think how potent you would be of you were getting everything the Elite Opportunity had to offer. Here's how to get the free two-week trial , or cut and paste this link: https://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/