How traders are trying to make money off of the jobs report

  • Some strategists are cautious ahead of the monthly employment report due out Friday.
  • Economists surveyed by Thomson Reuters estimate the data will reflect 185,000 ADP payrolls added.
  • Last month's report missed expectations.

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."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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