Some strategists are cautious ahead of the monthly employment report to be published Friday, and are looking to some risk-off trades.
"It seems like everybody is just ignoring the very tepid, very, very lackluster economic data," Boris Schlossberg, BK Asset Management's managing director of foreign exchange strategy, said Wednesday on CNBC's "Power Lunch."
Taking a short position in the yen right now is attractive, he said, as it is hitting technical resistance and "everybody's on the other side of the trade. Everybody thinks it's a done deal," referring to the market anticipating a strong U.S. employment number from the Department of Labor.
He believes the market is too overconfident in the state of the U.S. economy, and that the dollar/yen play would be impacted by a number significantly below economists' expectations, which stand at about 185,000.
"So I think any kind of a surprise, any kind of a small print on the nonfarm payrolls, let's say 125,000 maybe even lower should create a shock to the system and maybe get everybody out of the complacency that we have now," he said.
Sentiment is quite high right now, observed Max Wolff, market strategist at 55 Capital, but the tape has proved to be much weaker. Specifically, he pointed to a disappointing first-quarter gross domestic product figure, durable goods growth and nonfarm payrolls. He is keeping an eye on manufacturing numbers and hourly wage growth in the Friday report.
"Wages, wages, wages. We don't think the wages are there, and we think autos are pretty vulnerable there, and we think the housing space is pretty vulnerable there. We think rates grind higher, and we think the market really isn't as strong as people think in terms of domestic [markets]; a lot of the strength is international," he said on "Power Lunch."
Ultimately, Wolff would recommend selling auto stocks, and prepare for a tougher summer ahead as it has become a crowded trade.
Convergex's chief market strategist, Nicholas Colas, in a note to clients Thursday asked, "What could go wrong?" for the jobs report Friday.
"The simplest answer is that the Federal Reserve is fundamentally mistaken about the state of the U.S. economy," he wrote. "Its commentary [on Wednesday] shrugged off both a weak Q1 GDP print and the subpar March jobs report."