The market staged a big rally Tuesday and gave back a little yesterday. The futures are pointing to a strong rally at the open this morning. So far, things have followed the script I laid out last week. The question we face now is whether to sell into this rally or put money back to work in the market. And the employment report tomorrow complicates that decision.
The employment report is important every month but has taken on added significance this month. We have had more than one weak economic report recently and many are looking to this employment report for confirmation of an economic slowdown. If the slowdown is confirmed by the report, the likely reaction in the markets will be a continuation of the correction that started last week. The yen will likely strengthen and we found out last week what that means.
Given that we have recently seen an increase in first time and continuing jobless claims, I think the greater risk here is that the report will come out weaker than expected. Therefore, I will wait until after the report to make a decision about whether any further changes are required in our portfolios.