Traders will be heading into the weekend rather pleased with their lot. Financial markets such as the FTSE and Dow Jones have rebounded strongly after last Friday’s sell off after a slew of reassuring economic data and us company earnings reports.

Today should prove to be a stern test though – It is Friday after all.

What’s so special about Fridays?

On the face of it, nothing, it’s just another trading day right? Except that since the sovereign crisis kicked off in April, Friday has been unkind for anyone investing in US stock markets such as the benchmark S&P 500 (a wider and arguably more significant index than the Dow Jones).

Since April, Friday’s on the US S&P 500 have produced a loss of -10.81%, more than double the total market loss of 5% during that time.

It’s not just since April that Friday’s have been tricky either. Throughout 2010, Friday’s have produced an average loss of 0.5%. Although profitable over half the time, the average gain is small compared to the major sell offs like that seen on the 16th.

Is this just a quirk in the data?

Perhaps, or perhaps it’s simply the fact that weekends have brought news bombs from the likes of Greece which traders don’t want the exposure to.

A close today greater than 1.5% could be significant and a sign that traders are really ready to embrace risk again.

On the other hand, you could bet on traders following form and predict that the S&P 500 will fall after markets open around 14.30 GMT.

Forex Trading Today

There’s not much movement so far this morning but there are hints of strength in the pound and euro. However so far moves are nothing to write home about.

The main thing to be aware of today is the release of the hotly anticipated European bank stress test results. Some are expecting a whitewash, but the situation is hard to read.

Too many banks passing could be seen as a sign that the tests weren’t realistic. Too many banks failing and shock waves could be sent through the system. Personally I think the former is more likely, but the reaction to that scenario is almost impossible to predict.

Right now, no-one knows the exact time that the stress test results will be released. If it’s late Friday evening, it could certainly add weight to the Friday sell off trade idea.

Der Spiegel has a good piece previewing the tests which is well worth a read.

In addition, we have German IFO business climate at 09.00 GMT, Preliminary UK GDP at 09.30 and Canadian inflation at 12.00.

The Financial Fixed Odds update by David Evans, Market Analyst, BetOnMarkets.

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