The markets are flat again today as all eyes turn to the Non Farm Payrolls Report tomorrow. Expectations are for a gain of approximately 175,000 jobs in the month of July. So what happens if the number comes in sharply above or below estimates? Anything too high or too low will shock the markets and cause selling. Below I reveal the ranges, along with the likely stock market reaction.

1. Neutral Number

Any number between 150,000 and 200,000 will be looked at as a goldilocks report. In other words, the job gains are not too strong to force the Federal Reserve's hand to raise interest rates but not too weak to show the economy is sliding towards recession.

2. Slightly Warm Number

A number between 201,000 and 250,000 will be looked at as a slightly strong number. This will cause the markets to think there is a very slight chance of an interest rate hike later in 2016. The Dollar may strengthen slightly and interest would likely bounce. This could cause some minor selling in the stock market, but nothing major.

3. Slightly Weak Number

A number between 100,000 and 149,000 would be viewed as slightly weak. The markets would likely believe the Federal Reserve will not hike rates at any point in 2016. Yields may slip a little and the Dollar likely would weaken. Markets would react in a flat to slightly lower manner with the ever so slight hint of a potential economic slowdown drifting through its mind.

4. Extremely Strong Number

A number over 250,000 would be very negative for the stock market. It would potentially put two rate hikes on the table and suggest the Federal Reserve is behind the curve on raising interest rates. It would also cause the Dollar to spike dramatically higher and yields jump sharply. Yields jumping would cause money flow to exit stocks and enter the bond market, thus creating a stock market sell off.

6. Extremely Weak Number

A jobs number below 100,000 would freak the market out worst of all. Why? Because it would send a panic of recession through the stock market. This would be two extremely poor jobs reports in the last three. In addition, it would suggest to investors that all the Federal Reserve easing over the past seven years has not worked in a sustainable way. Investors and the stock market would likely start to lose confidence in the Federal Reserves ability to stem a recession and a huge stock market sell off would follow.

By Pro-Trader

Anthony Jackson