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Fixed-odds wizard: week 36

Created:
7 October 2008
Updated:
14 October 2008
Written by:
Matt Shaw

Where do I begin after a week like that? These are tumultuous times to be sure. We haven't seen conditions like these since the 1970s - perhaps even the 1930s.

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Even after what's happened, I still believe the pound should rally against the dollar. However, this may have to wait until we see the US authorities slash interest rates again in order to ward off catastrophe.

The euro and sterling are both at multi-month lows against the greenback. But they can go lower before any recovery is seen.

I plan to sell the pound against the dollar, but then buy back into it on any major rally. I believe that a lot of sideways action could be in store between now and the end of the year.

My "£100,000" target account is back on the rails, although I am only up to just over £15,000, from a starting level of £6,700. But that's still many leagues below my target, thanks to my big slip-up back in the summer.

I am currently looking at the Dow Jones, the FTSE and a picky trade on the sterling/dollar rate to build up some new profits.

My other target account - where I'm aiming to turn £1,500 into £10,000 by year-end - is now at £2,800.

The next trade on that account will be selling the Dow if it fails to hold onto levels that were lower than last weeks lows. Any more selling here, and you should go along with it.

However, if a down-move does occur, it should not be drawn out. History tells us that, when the markets sell-off so significantly, they snap back all the more aggressively, at least for a short period.

With the magnitude of the current sell-off, the next reaction rally could be one of the biggest yet.

If US Federal Reserve Chairman Bernanke has anything surprising to say on Tuesday, you can expect the dollar to move swiftly. However, traders and fund managers alike are expecting a rate cut immediately, so it may take a lot from this release to move the dollar out of its current trading range.

On Thursday, the Bank of England will decide on rates here, and maybe the pound could rally against the dollar and also the euro. But after any rally, I'm looking to go short after a few short days.

So, I'm holding fire until Thursday. I want to see how low the Dow can go. I will probably be getting in on buying the Dow back up, before I actually decide on selling it again, given that it has already sold off substantially.

MORE ON FIXED-ODDS BETTING...

Read all Matt Shaw's columns...

Or see Investors Chronicle's new, FREE, investment guide to fixed-odds betting.

If you have any queries about fixed-odds, or trading the indices in general, I'd love to hear from you. Please e-mail me on: matt@fixedoddssuccess.com.

Or visit my own website at www.fixedoddssuccess.com

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