In the last couple of weeks, I was becoming more cautious with equities with 1684 a big technical level on the S&P, and the prospect of some relative fiscal tightening. At yesterday’s meeting the Fed unexpectedly kept asset purchase at $85bn per month, and with that markets have spiked to all-time highs. Volumes notably remain thin, and it could be argued that participation in this rally remains low from an institutional investor point of view. The odds of higher prices have increased with signs of further weakness for the US dollar.

Looking ahead it may not be until the December Fed meeting that we get any further rhetoric of tapering, as that meeting is the one most likely to have an announcement given it is the next meeting accompanied by a press conference. In the meantime, it would be wise to keep an eye on traditional measures of technical. The sell-off of the past couple of months took away some of the froth in the market and we are not yet overbought, breaking fresh highs would suggest there is further room the upside, but in the near future I would start to become more concerned on inflationary pressures especially if the dollar continues to slide lower. With this in mind, I am happy to remain a bear of stocks but would wait before committing to fresh downside exposure as I believe there will be better opportunities in the weeks ahead, and I will be looking for some technical signals to illustrate such.

Philip Ball | Sales and Trading