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Where do stocks go from here?

A worker carries a Heart Pine plank of lumber in the sawmill at the Goodwin Co. facility in Micanopy, Florida,
Mark Elias | Bloomberg | Getty Images

The economic data has been poor this morning, though the market reaction has been fairly muted.

Are we once again at another failed attempt to hit a new high?

The bears have several arguments:

1) Market is full valued (17.5 x forward earnings)

2) Earnings and revenue growth remains negative

3) Growth prospects are weak

4) Macro risks: Brexit, Fed, U.S. election

The close is very important today. We have moved up in the last hour every day this week. The full valuation would be a very logical reason to reverse that short-term trend.

The bigger issue is, will today's data be the start of reversing the longer-term trend: that there is little alternative to owning stocks in a slow-growth, low-rate world.

That would take a bigger paradigm shift than just one day's economic data, but it's one the bears are already making. They argue that central banks are losing credibility as low (and even negative) rates have less and less impact, and lawmakers seem powerless to enact needed fiscal reforms.

May ISM services came in at 52.9, below expectations of 55.5, with new orders at 54.2 from 59.9. The employment component of the ISM report dropped into contraction territory at 49.7.

The May nonfarm payroll report, at 38,000, with downward revisions in prior months, was also a negative.

Not surprisingly, bank stocks have opened weaker as bond yields are lower.

The weaker dollar has been a help to commodities; base metals like copper and commodity stocks like metals are higher; energy stocks are mixed.

Overall, the pattern for stocks today is fairly typical of what you see when there are big misses in the jobs report. Cyclicals like consumer discretionary and industrials are weak, defensive names like Utilities are flat.

Our partners at Kensho note that of the 31 times since 2006 when the jobs report has missed by more than 50,000, consumer discretionay and industrials underperformed and consumer staples and utilities did better, though both were down slightly. In other words, the market typically become more defensive.

Going into today, the market has been holding up well. The advance/decline line has been moving up. Health Care has been a leader in the first days of the month, Tech was a leader in May, both healthy rotation from the Energy and Materials in prior months.

The Russell 2000, which has lagged the big-cap S&P 500 for a year, was at a six-month high.

The Nasdaq was at a six-month high.

And the S&P 500 was within two percent of an historic high.

The S&P so close to new highs has been the source of endless frustration for traders. We have failed numerous times to hit a new high since the S&P hit an historic high in May 2015.

My message to everyone on this is, relax. It's actually the norm.

Dan Wiener, who runs the Independent Adviser for Vanguard Investors, one of the best investor newsletters, noted in a recent report that since March 1957 the S&P 500 has spent 37 percent of the time within 5 percent of a new high. It's spent 6 percent of the time at a new high. It's spent 57% of the time down 5 percent or more.

Think about that. The S&P 500 has spent 37 percent of the time within 5 percent of a new high. That means that all this angst over the inability to hit a new high is hand-wringing over perfectly normal market action.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

Wall Street