In the last couple of weeks I highlighted a couple of levels to focus on, and given that we have blasted through those aforementioned levels it is worth looking at the next possible areas of resistance. In the S&P, we closed on Friday above the psychological 1500 level, and whilst markets are on a massive run becoming somewhat overbought, an inverse head and shoulders pattern with the neckline broken at around 1440-1450 suggests a target of around 1550. Looking at the Dax, markets stalled in the past couple of weeks stalling in particular at the 7780 level, we saw that level violated quite sharply on Friday, with 8105 (the highs made back in the summer of 2007) the next obvious target. Both levels are only around 3% away and whilst I couldn’t rule out pullbacks, in the absence of any negative news and a real feeling that investors, in particular the smaller end of the scale, are nowhere near fully invested in equities, the targets feel achievable, especially given the loose monetary policies of many central banks right now. I am certainly becoming more cautious of the markets but would await evidence of some sort of capitulation to the downside before making any downside bets. It is worth noting that the debt ceiling limit has been removed on a temporary basis until May 19th although the next date of interest will be April 15th, the deadline for when both political parties must adopt a budget resolution, the closer we get to these dates the greater the need for caution will become…….Good luck, Bally.

Philip Ball | Sales and Trading