Friday already? An ugly May for the major markets and so far an ugly start to June but it's all pretty much par for the course right now. Low jobs growth and higher than expected unemployment numbers are getting the blame today. As far as we're concerned though, it's still all pretty logical but this is the real acid test right now like we mentioned yesterday. Advertisement Could This Tiny Stock Be The "Next Subway"? The folks at Penny Stock Research just released a free report that details 3 LEGITIMATE penny stocks that could soar in the second half of 2012. One's a tiny restaurant stock trading for 80 cents that's poised to become the next Subway... Click here to get the FREE report with all the details! Advertisement As I type, the S&P and the DOW both took out new lows but the NDX is still holding its ground trying to hang on while only four points from its May low. Like we've said many times, the NDX has been the strength of the three major indexes for a long time now and it's doing its best to try and put in a double bottom here. Will it hold? We're going to find out pretty soon. I'll say this... the longer it sits around the current level, the less likely it will hold. More often than not, fast snapbacks spark rallies and not continued testing of a bottom hour after hour. That's usually a recipe for a breakdown. If this market can't find some solid footing very soon, it isn't going to be pretty. Since we haven't been putting much emphasis on the DOW or S&P for quite some time now, I've included a small weekly chart of each here. You'll see we're right at that 3/8 retracement of the whole rally starting in October of last year up until April of this year. This is a very logical level for the market to at least provide some sort of relief rally, so if we don't get it, the picture changes dramatically. The NDX continues to do its part to make a stand but one index does not a whole market make. A strong rally into the close would be a huge vote of confidence for the bullish argument, specifically if it can retrace all of today's losses, which when using bar charts is called "railroad tracks". Railroad tracks can often be a strong signal for a reversal, so it's worth watching today if this market can shake the weak government data. Speaking of that government data, we've also included a chart of monthly payrolls here dating back a number of years and how it has coincided with the S&P. The simple picture tells you the markets are leading in nature based on what it thinks is coming as opposed to what's already happened. Although the media overdramatizes every monthly report, which is how they generate ratings, you can also see here that when you eliminate all of the drama, job growth is simply in a bit of a sideways range. When trying to make sense of how the market is interpreting economic data, I think it's key to look at the bigger picture and the bigger picture simply tells us that things are just sort of maintaining status quo. My two cents on the topic is that much of the growth we've seen come out of the large cap earnings reports for many quarters now hasn't been so much a result of increased top line revenue in most cases, but rather improved bottom lines due to cost cuttings and improved efficiencies. That's only going to last so long before you've got to truly grow revenue and increase earnings because of increased demand. That's likely going to be the key going forward. Capital spending and consumer demand are going to be a large part of the catalyst if this market is going to improve for the long haul. However, we'll really know this economy is headed in the right direction when small business starts to thrive again. I sure would like to see some economic data on the number of small businesses on a month-to-month basis that are created along with how many doors have closed over the last few years or so. Give me that chart in a weekly chart and that will tell you just what's going on underneath all of the corporate behemoth success over the last while. Sure, Apple, Google, Starbucks and the like have reaped the reward of growth but what about Mary's Café and Jim's Chevy Dealer in small town Midwest? Your Brokerage Firm's Market Makers are Not Your Friends. Been watching some very heavily traded penny stocks on my level 2 platform all week and it reminded me about a few very common mistakes investors and traders make when playing with penny stocks. Other than buying a bad stock, putting in an overnight market order is probably one of the worst things you can do if you're looking to get a favorable price for appreciation. If everyone put in market orders overnight, they're basically giving the market makers a crystal ball to see the lay of the land, thus providing them with an opportunity for manipulation and don't think for one second they don't love that. For those of you who may be new to the market or have never even heard of a market maker, they are the guys and gals that execute your order on your behalf. Market makers bid and offer stock within a spread looking to somehow make money off your order. If they can buy the stock cheaper and give it you at a higher price, they'll do it all day long. Same goes for the flip side, if you're looking to sell and you give them enough free reign, they will sell your stock for as low as possible within the market and buy it back cheaper. We could go on and on here when it comes to market makers but the bottom line is that there is a simple rule to getting the best price execution when you're ready to buy or sell a stock. Never put in an order to buy or sell anything until the market has opened. Period. And, use a limit price. Avoid using market orders pre-open or post close and you'll likely end up with better price execution. The second biggest mistake I see investors make when it comes to penny stocks is buying them when the stock opens higher on the open than where it closed the previous day. It's called a "gap up". Most traders and investors who have at least a decent knowledge of the markets understand the gap. Unless there's extremely impactful news that is going to literally change the future of the Company, never buy a stock when it gaps up. When the news is not earth shattering or when there's no news at all, there's a very good chance that after the stock gaps up on the open, it will come back and fill at lower prices and that's when you can jump in and take your shot. I don't have a problem trading gaps with index ETF's but when it comes to individual stocks, remember my point here. Huge news that will change the future of the Company? OK. No news or news that's not all that impactful? Not OK. Our Facebook Prediction. I went out on a limb yesterday and provided you with a speculative share price I thought would be at least a logical short-term bottom for shares of Facebook (FB). The number I provided was $24 per share. The stock moved lower yesterday to $26 and change before rallying to almost $30. Does that count? I was only off a couple of dollars. Ha. In all seriousness, if the NDX doesn't hold the May low, you're likely going to see $24 for FB shares. If we do hold up on the NDX, $26 and change was likely the short-term bottom. Today's test of the low is no joke. We're at an extremely pivotal point in the markets right now. One that is likely going to provide the trading landscape for at least a few weeks to come. Have a great weekend, we'll see you on Monday.