Monday sees the launch of one of the biggest bailout/stimulus efforts in history. Secretary Timothy Geithner is due to reveal how the Treasury will use the second half of a $700 billion bank bailout package as well as unveiling new programs to aid the ailing financial markets. The size and quality of the stimulus is obviously unprecedented but will this be enough or will we be back here in another year?

From a trading point of view I’m nervous on both fronts. If this is an amazing package (I have my reservations) then there could be a violent whip snap back to 8500 on the DOW bringing the FTSE 100 up to 4500. In this scenario most traders would be anticipating a recovery and buying stocks while I on the other hand would be selling short. I don’t believe the US can fix this alone and China along with Europe could undo all the good work any stimulus will do. That’s why I would sell any rally.

I do have shorts open at present and my concern is that the markets rally. If on the other hand market participants judge the efforts wanting then a large sell off will push us past the lows and with no backup plan look out below for equities. Great for me but the ramifications are huge and the outlook bleak. I have no strong opinions on what will happen but I will be watching with baited breath.

Just out: U.S. nonfarm payrolls plunge 598,000 in worst month since 1974 increasing the jobless rate to 7.6%