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Can Rally Endure If Employers Keep Slashing Jobs?

The Dow continued its march higher on Wednesday shrugging off the latest economic data which was bearish to say the least.

According to the latest ADP Employer Services report, private employers cut 39,000 jobs in September. That was the largest monthly loss since January and a disappointment to analysts who had forecast 24,000 private payroll additions.

That does not bode well for Friday's all-important jobs report. Currently non-farm payrolls are forecast to come in unchanged on Friday, according to Reuters data, though private payrolls are expected to add 75,000.

Can the rally endure if Friday's jobs report is also weaker than expected and shows more job cuts?

Some investors think it can.

"I think it's a 'win-win' for the market on Friday," says Bruce Bittles, chief investment strategist at Robert W. Baird in a Reuters interview.

"If the report comes in weaker than expected, it will prompt the thinking that the Federal Reserve will begin quantitative easing sooner than later and be more aggressive. If the report comes in stronger than expected, it means the economy might be doing a little better."

How should you position now?

Instant Insights with the Fast Money traders

The market wants to go up right now, says Guy Adami. You can’t fight the tape in the near term. But I don’t think it’s going to end well.

Data points have been okay over the past several months and now investors think that central banks around the world will provide a backstop, adds Tim Seymour. That suggests to me markets drift higher in the short-term.

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OIL OCTOBER?

Looking at the energy trade, oil's October run continued with crude topping $84 briefly as gasoline inventories fell.

What’s the trade?

I'm watching the integrated oil companies which have lagged, reveals Tim Seymour. Exxon finally crossed the 200-day moving average. I think it may be 'game on' in the space.

If you’re been holding Baker Hughes for the past couple weeks think about taking profits, counsels Guy Adami.

I’d play the space long Pioneer Natural Resources, says Brian Kelly.

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EURO BREAKS ABOVE RESISTANCE

The euro broke above a key technical resistance level against the dollar on Wednesday as expectations that the U.S. Federal Reserve will further ease monetary policy continued to weaken the greenback.

The technical target was around $1.3896 on EBS, a 61.8 percent retracement of its fall from above $1.51 late last year to its June low.

How should you play it?

The euro is appreciating but I think the economies of the euro zone are weak, says Tim Seymour. Europe has outperformed since May and to me that’s a sell signal. I play it with pairs trades. Look at long GEagainst short Siemens . Or long JPMorganor Morgan Stanleyagainst a short position in Deutsche Bankor Santander.

Because there's the potential of a world wide 'race to debase' I think the best plays are long US mutlinationals that have strong overseas exposure so you can divest that risk, says Karen Finerman. I'd look at a company like Yumor McDonald’s .




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Trader disclosure: On Oct. 6, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Guy Adami owns (AGU), (INTC), (BTU), (NUE), (C), (GS) and (MSFT); Tim Seymour is long (AA), (AAPL), (BBY) and (MON); Karen Finerman's firm is short (MDY); Karen Finerman's firm is short (SPY); Karen Finerman's firm is short (IWM); Karen Finerman's firm is short (IJR); Karen Finerman's firm is long Russell 2000 Puts; Karen Finerman's firm is long S&P 500 Puts; Pete Najarian is long (AKAM) calls; Pete Najarian is long (DD) stock; Pete Najarian is long (WFC) put spread; Pete Najarian is long (BP) call spread; Pete Najarian is long (GDXJ) stock; Pete Najarian is long (ABX) call spread; Jared Levy is long (SPX); Jared Levy is short (GLD); Steve Cortes is short (XLF); Steve Cortes is short (BAC); Steve Cortes is short Mex. Peso; Steve Cortes is short Euro; Steve Cortes is short (BIDU); Steve Cortes is short corn; Steve Cortes is long German bonds

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