Daily Summary:

• Australian trade balance came in well below estimates.
• AUD/JPY down 0.65%, but still well up over two days. The AUD/USD is down 0.5%.
• General pullback after yesterday’s strong rally. So far nothing out of the ordinary, but there is a busy day ahead.

Trading Today

• UK Nationwide House Price Index is due at 07.00. Recently UK housing data has been disappointing with increasing signs of the market slowing down, perhaps even forming a double dip recession. A drop of -0.3% is expected from this month’s numbers.
• Swiss retail sales are due at 08.15. The CHF has been the currency of choice for those looking for a safe haven in the last week, so there could be some big moves on the Dollar/Swiss Franc and Euro/Swiss Franc if sales deviate significantly from the expected +2.3%.
• At 12.45 we have the latest rate statement from the ECB with the press conference to follow at 13.30. No surprises are expected with the rate announcement but the press conference could reveal some juicy trading tip bits. An extension of the ECB’s liquidity program is expected as suggested by BundesBank president Weber.
• At 13.30 we also have US unemployment claims with a slight rise to 476,000 expected.
• Rounding off a heavy data day we have pending home sales at 15.00 and Fed Chairman Bernanke speaking at 14.00.

Have the Markets Reached a Bottom? How to Trade It

Before yesterday’s rally, investor sentiment was at extreme levels of bearishness. Quantifiable Edges has a great post demonstrating the implications of this.

Generally, when the crowd all reach for the panic button at the same time, it has paid to do the opposite and buy. On average, markets are higher six weeks later from this extreme negativity 81% of the time.

However, there is a kicker. When this pattern fails, it fails big time. So a rally is more likely over six weeks, but the downside can be huge if the rally fails.

This is a great example of the advantages of ixed Odds Trading. If the markets do reverse violently, your downside is fixed.

Here’s how you could take advantage:

A Higher/Lower trade predicting that the Dow Jones will be higher than 10,600 on the 18th of October could return over 100%. 10,600 represents a 6% rise off the lows, which is below the average 7% rise seen when markets rally from similar levels of extreme bearishness.

With the AUD/JPY highly correlated with the stock market, you could make a similar bet on forex markets. A Higher/Lower trade predicting that the AUD/JPY will be higher than 78.00 on the 4th of October could return 142%. 78 represents a 6% rise off the lows.

Editor’s Note: The above trades are financial fixed odds trades, if you lose, you will lose 100% of your stake.

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

This website content does not constitute investment advice. No individual contributor, contributing company, BetOnMarkets nor Online-Spread-Betting.com accept any responsibility for any use that may be made of the content.