Market Rebound?
by: cordieliea | Total views: 89 | Word Count: 625 | View PDF | Print View
Many traders will be breathing a heavy sigh of relief this week as the
economic calendar lightens comparatively. The US interest rate decision
weighed heavily on trading action last week. The FOMC announcement had top
billing and it certainly didn’t disappoint. Many analysts were expecting a 25
base point cut, with much speculation on when the next cut would be. The 50
base point cut took many by surprise and the market reacted with typical
enthusiasm.
Bernake and Co became the heroes of the hour on Wall Street, with them
seemingly averting the credit crunch and saving the day. The Dow Jones rose
2.5% on Tuesday, and the following day, the Nasdaq 100 came within 4 points
of its July peak. Crisis, what crisis? In fact some commentators are now
labeling the latest concerns a “faux” credit crunch.
The decision has sparked some strong movement in the currency market with the
Dollar falling hard against the Euro. The Euro remained strong across the
board with the ECB maintaining their tightening bias. The “Loonie”, as the US
Dollar/ Canadian Dollar exchange rate is called, fell hard due in part to the
rise in oil prices. The USD and CAD are now standing at parity (1USD = 1
CAD), the lowest levels for well over 30 years.
Over in the UK, the queues outside Northern rock disappeared as the Government
and Bank of England intervened with various measures and reassurances, aimed
to calm jittery investors and savers.
Next week is a relatively lighter week on the economic news front. Notable
announcements are the US existing home sales on Wednesday, and new home sales
on Thursday. With the US housing market being at the forefront of the current
situation, this data could bring fresh perspective on the intermediate
future. Although it is too soon for the recent rate cut to have any impact,
Wednesday’s core durable goods orders and Friday’s PCE price index will give
clues as to the implications of the 50 base point cut.
Opinions on the Fed’s rate cut have been mixed, with Wall Street enjoying the
move and some economists questioning its wisdom. As the impact of the
announcement settles down, some are questioning what the Fed knows, that the
rest of us don’t. What was it that spooked the Fed into a half point cut? The
implications are that the large cut was made because of the state of the
economy, particularly the housing market and job growth.
Last Friday saw options expiration day, and according to research from
www.sentimentrader.com, since 1990, the week following options expiration in
September has shown a positive return on the S&P 500 just 2 out of the last
17 times. Taking out the week following 9/11, the average return for the week
is -1.3% with the maximum gain being +0.6. One must always take such
seasonality studies with a pinch of salt, but coupled with the dramatic rise
we saw on one day last week, it could lend credence to the argument that
we’re short term over bought on the US markets.
A no touch trade, 90 points higher on the S&P, returns around 7% over 14 days.
This means that as long as the market rallies slowly, stays still, or drops,
you win.
You may also wish to have a look at BetOnMarkets.com’s new “Double Contra”
which pays out if the market never touches the two barriers you set above and
below the current price. If it touches just one or neither of these you win.
If volatility reduces during the relatively news light week, it could be an
interesting play, particularly if you weight it to the downside.
- THE END -
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About the Author
Betonmarkets.com is the leading fixed-odds financial betting website. The
website has processed over 10 million bets since inception in 2000, and
generates annual turnover in excess of US$ 100 million. Betonmarkets offers a
wide range of fixed-odds financial bets on forex rates, stock indices, and
international stocks.
Betonmarkets is operated by the Regent Markets Group of companies. Regent
Markets is affiliated to the Regent Pacific Group, a Hong Kong-listed
investment group. Regent Markets has offices in three countries, and holds
bookmakers licenses in the Isle of Man, the UK, and Malta.
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Fixed-odds bets are also known as binary options, binary bets, contingent
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BetOnMarkets Bet Types:
One Touch Bet: You would buy a one-touch bet if you believe the market will
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No Touch Bet: A no-touch bet is the opposite of the one-touch bet. You would
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Bull Bet: You would buy a bull bet if you believe the underlying
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Expiry Range Bet: You believe that the market will be between two distinct
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