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Market Pros: Relief Rally Likely, but Fade the Move

Among pro traders, chatter on the floor had everything to do with the impact Friday's jobs number might have on the S&P 500.

Every month the jobs report moves the market, but considering all the weak economic data released earlier in this week, Friday’s number could well determine the next big move.

According to Reuters, Friday's jobs number is expected to show the economy added 150,000 jobs in May. Investors could take the gains as a sign of a slower move in a positive direciton or they might compare the headline number to the 244,000 new jobs created in April. In the latter scenario the trend would be negative and potentially bearish.

But back on the positive side, a weaker than expected number could send the dollar lower - and typically that's good for stocks. Also it may fuel chatter of additional help from the Fed.

And back to the bearish side - the technicals appear to be somewhat precarious. The S&P breached the key 1311 level on Thursday before paring loses and closing ever so slightly higher.

That’s important because 1311.80 was the S&P’s lowest point in May – a level the index touched on the 24th of that month. Technically, if 1311, can't provide support it may turn into a level of resistance.

Considering the market could go either way, what should you expect?

Instant Insights with the Fast Money trader

Guy Adami thinks that economic data released earlier in the week will turn out to be a head fake and that Friday's jobs number will generate an upside surprise and subsequent relief rally.

If Adami’s scenario plays out, he says the trade is to fade the rally. As the S&P approaches 1325 Adami would be a seller. Big picture he expects the S&P to wash out. “I’d expect to ultimately see the market test 1275, but not on Friday,” he says.

Tim Seymour largely agrees. “We could be setting up for a relief rally on Friday,” he says, “but the risk is to the upside.” In other words, he thinks it would be a mistake to believe a stronger jobs number was a sign the rally was in tact. “If we do get a rally I’d fade it, too,” he says.

Whether the jobs number comes in higher, lower or inline, Steve Grasso thinks the trade is sell, no matter what. “If the market pops, then sell the rally,” he says “and if the jobs number is bad, then sell early.”

Grasso closely watches technicals and he doesn’t like that the market is testing the May lows. He says if the S&P closes below 1,311 on Friday, it could open the window to bigger down moves.

In fact if the market breaks 1300 -- Grasso says the next two key levels to watch are 1294 the Libya bottom and after that, 1275 the Egypt bottom. "On Friday I'd trim longs," he says.

Joe Terranova wouldn’t get out of the market but he would rotate into defensive names. “I’d go with big balance sheet names,” he says, such as longIBM .

Although he anticipates a sell-off during June, Tim Seymour thinks some stocks have made sharp moves lower already and are getting attractive. He suggests putting Freeport , GM and JoyGlobal on the radar. “There are places to play,” he says.








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Trader disclosure: On June 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by “Fast Money” traders; Terranova owns (XOM); Terranova owns (KSS); Terranova owns (CVI); Terranova owns (OXY); Terranova owns (TM); Terranova owns (BJ); Terranova owns (DIS); Terranova owns (PFE); Terranova owns (V); Terranova owns (HPQ); Terranova owns (FLX); Terranova owns (JPM); Terranova owns (MCD); Terranova owns (PEP)
Terranova owns (VRTS); Terranova is short (DELL); Grasso owns (AKS); Grasso owns (AMD); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (C)
Grasso owns (D); Grasso owns (HOV); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Adami owns (AGU); Adami owns (C); Adami owns (INTC); Adami owns (GS); Adami owns (MSFT)
Adami owns (NUE); Adami owns (BTU)

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