The monthly jobs report is finally here and tomorrow's results should either accelerate the rally or spark some serious profit taking. One possibility is that stocks rally in the morning only to reverse midday and close lower, which would be a bearish reversal and a sell signal. There are still plenty of big money managers looking to lock in gains from 2009.
The reaction to the jobs report tomorrow could be big because there are so many opinions on it from job losses to huge job gains (upwards of +80K to +100K). The consensus estimate just changed from -8,000 jobs to minus zero jobs (unchanged). There is a chance that Wall Street will be surprised by the numbers and the bigger the surprise the bigger the move. I suspect the report will be positive and finally end two years of consecutive monthly job losses. The government plans on hiring huge numbers of people for the 2010 census and while these are temporary jobs they're going to be counted. Keep in mind that if the jobs number is positive it doesn't guarantee a market rally.
The Premier Investor newsletter is already heavily weighted to the long side so if the market rallies we should do fine. If stocks reverse then we face a challenge. For nimble traders I'm proposing some potential bearish candidates. Considering shorting the QLD (double-long NASDAQ-100 ETF) or buying the QID, which is the double-short on the QQQQs. I'd also watch the transportation sector, which looks ready to breakdown from its trading range. You could short the IYF transport ETF. Check out the energy sector. Both the OIX and OSX indices have rallied straight to their 2009 resistance. A failure here will look like a bearish double top. Possible trading vehicles are the XLE and OIH or the DUG and DIG ETFs. If you're looking for something to buy as the market falls then check out the VXX again, which should rally if the Volatility index spikes on investor fear.