Tomorrow morning, the Non-Farm Payrolls report is due and the markets are in upheaval erev-First Friday. 

The traders are having a real heck of time determining whether we're in the middle of an economic expansion, or an economic depression.

The talking heads are out in full force, discounting the value of Non-Farm Payrolls in light of Hurricane Katrina and Hurricane Rita; and in the face of plummeting oil prices; and with respect to contradictory economic data released week after week.

And yet, the Fed constantly telegraphs that it will continue raising the Fed Funds Rate.  This is a signal that the market is in the midst of an expansion, and showing signs of stronger-than-expected inflation. 

If the Fed is focused on slowing growth using increases to the Fed Funds Rate, we should all take note and react accordingly. 

For every Warren Buffett whose every stock purchase moves markets, there are literally hundreds of private traders who read their own charts, devise their own formulas, conduct their own research, and make millions on their exceptional informational advantage.

These are the best traders in the world and you and I never hear about them because they don't sell their systems to the public on Bloomberg or whatever.  It is far more profitable for them to keep their informational advantage a secret. 

But! There is one group that actively shares its research and encourages traders to apply its findings. That group, of course, is the Federal Open Market Committee.

The FOMC as a group has two major advantages over every market participant:

1. It gets access and published more information than an individual trader can
2. It can change the game (i.e. our nation's monetary policy) if conditions warrant it

So, as bonds get whipsawed this week, we can conclude that traders chose to ignore the Fed's stance that inflation is present and now they've found themselves in a poorly-planned long position.

The Fed is reiterating that it will raise the Fed Funds Rate as needed -- just as it has for the past 18 months -- and, yet, market participants suddenly looked surprised.

When Non-Farm Payrolls misses expectation tomorrow morning, don't knee-jerk and try to win on the news.  The smartest market player has already shared the near-term economic projections with you -- strong, healthy, and expansive.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.