Thursday, October 7, 2010

10/07/2010 NFP report preview

Good evening traders!

You all get an exclamation point today :) because tomorrow is the non farm payrolls number. One of the biggest econ reports of the month. Goldman Sachs says the number will be -50,000 jobs with a .1% rise in unemployment. would that be bad? good? who knows ! A bad number could mean more QE (quantitative easing) or a good number would mean QE is working and all will soon be well. anyway you cut it I'm willing to bet the market goes higher. Its really just a crap shoot though! I will play the hand I'm dealt and you should do the same. In the meantime I'm going to construct a few scenarios.

First is a bad report. In this case I'll prefer shorts down to 1134.50 where we have a gap fill. we may get a pause at yesterday's low and again around 1141.50. I'll try to do business at those levels

On a good report we could break over today's high in which case I would be less likely to take longs given the run up in the markets. I would try to short 1168.00 and if I fail there then cover and re-short at 1173.00 where we have very significant resistance on a composite profile dating back to April.

The last scenario involves the relationship between the Dollar and stocks. Traders please consider this: The Dollar and SPY are nearly a perfect inverse correlation the past 3 weeks. One up 2% one down 2%. A poor NFP number may stun the Dollar and send stocks higher. Or the inverse, where the Dollar strengthens on good numbers but stocks fail to rally because of the Dollar strength. The more I consider the recent correlations between these two markets the more I find this scenario to be the most likely for tomorrow.

The plan:
Pay close attention to the USD and VIX to see if the risk trade is on or off.
Wait for markets to settle after the data has been released.
Trade where you want to trade, don't force your will on the markets.
preserve capital!

Have fun and good luck tomorrow !


Also I am on Skype now so if you want to chat send me an email, I'd love to hear from you.

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