Jobs Report Friday and Tactics

Apr 5, 2007: 9:00 AM CST

Following the surge Tuesday, the market is consolidating yet again, but this time the likely culprit is the upcoming holiday weekend (the Market will be closed Friday) and the release of the Jobs/Economic Report Friday morning. The report often swings the market quite forcefully in either direction, and for short-term traders, it is often best to go into this report flat.

If you are new to trading and are using charts and technical analysis only, realize that some days are better to flatten (exit) your positions and wait for a major report to pass and then enter after the report if the market continued in your direction (or at least stayed neutral in movement).

With the market so shaky (in terms of economic data), fundamentals and economic news tend to drive charts, not price patterns or indicators. At these times, you are most likely to see standard chart patterns and indicator signals fail (or become instantly profitable). What I am saying is that, although people move markets (by trading), there are various groups of traders, and the “big money” tend to establish/close positions based on larger economic macrodata and short term traders try to ride their coattails when they suspect their movement.

Now, with my warning stated, realize that with sudden (expected) volatility, the opportunity to profit is great with these opportunities. If you suspect you can predict the report and establish a position ahead of it, you can easily capture 100 or more Dow points (or actual dollars in stocks) within 30 minutes of the report’s release (including Federal Reserve Meetings/Policies).

Realize that trading this way (ahead of a report you anticipate) can easily equate to gambling, as there is little edge (repeatable profit over time) using this strategy. To play out your edge, it is best to take signals, but be aware of key days in the market where price will become suddenly volatile because of an announced report (this is akin to trading earnings releases in stocks – probably not a good idea for most people).

Be safe, know that we could see a major gap (in either direction) in the market ETFs and other stocks Monday morning, and be sure to enjoy the Easter weekend!

(Bonus quote from Yahoo Market News this morning: “The market went up on fumes this week,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher. “Nobody has any wild expectations to the positive for the jobs report. But, barring some kind of negative report, I still think we’ll see the market tread water.”)

Might I add: If the expectations are so negative, and if the report surprises to the upside, then the market will likely rally hard and gap up strongly Monday (a warning to the shorts). There is no way to know what will happen until it happens, but don’t let it catch you off guard.

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