IF, and I mean IF the Economic Numbers Come in Solid - Plays for Friday

This market has been driven lower by bad economic report after bad economic report.  Over the past eight trading days the Dow Jones Industrial Average has dropped 709 points or 6.79%.  Tomorrow there are two economic report to be released – the Employment Situation (or lack thereof) at 8:30 a.m. and Factory Orders at 10 a.m.  The expected numbers are for a drop in employment of 125,000 jobs and a move up to 9.8% from 9.7% in the unemployment rate and -0.5% for Factory Orders.

IF, and notice the capital letters, IF, the reported numbers come in close to the expected or even beat the market is set up for a nice relief rally.  This article deals with what to do IF these numbers come in solid.  IF they do not, get short or stay away.  Remember, we are headed into a long holiday weekend and that usually means traders taking risk off the table.  IF traders are still heavily short, that means short covering driving the market higher.  IF traders see a weak number tomorrow morning they might get even shorter or sell more long positions driving the market lower.

First let’s tackle stocks that I recommended as shorts in previous articles; Northrup Grumman (NYSE: NOC) and Avalon Bay (NYSE: AVB).  Tighten your protective buy stops up here to $55.06 (NOC) and cover your AVB on the open.

Jim Cramer from CNBC’s Mad Money loves Apple Inc. (NSDQ: AAPL), Deckers Outdoor Corp. (NSDQ: DECK) and Netflix Inc. (NSDQ: NFLX).  These are stocks that have been running higher and many people find it hard to buy a stock near its high.  This market pullback has pulled these three stocks back into nice entry points so if you want to dip your toes in these waters now is as good a time as any.

Research in Motion Ltd. (NSDQ: RIMM) has been hit for over 20% in the past two weeks and formed a hammer Thursday.  Place a buy stop at $49.42 to enter looking for a bounce.

Jacobs Engineering Group Inc. (NYSE: JEC) has been hit for 13% in the past few weeks and has also formed a hammer.  Place a buy stop at $36.26 to play for a bounce.

One pocket of strength today was retail and J.C. Penny Inc. (NYSE: JCP) looks to be oversold.  If the economic numbers come in decently this stock could move higher.  CVS Caremark Corp. (NYSE: CVS) is a specialty retailer that also looks cheap here.  Enter this one with a buy stop at $29.36.

My last pick for tonight is the ProShares UltraShort U.S. Treasury ETF (NYSE: TBT).  The bond market has rallied strongly as the economic numbers come out weak.  Buying this is getting short the Treasury market which is opposite what many traders are doing these days.  Play at your own risk but a number on the employment situation better than what is expected will see this ETF rally sharply.  Buy stop your way in – set at $35.76.

Thursday, July 1, 2010 - 9:00 p.m.