Summer rally lifts markets towards major highs

Just seven days ago we had a shift in momentum to the bullish side. Most traders have been surprised to the extent of which this rally has taken the markets towards major highs in such a short space of time. After seeing potential bearish signals earlier this month the markets have completely ignored any signs of weakness. Instead the stock indices have reached the March highs for the US and the UK is just shy of a few points of reaching the key 6000 psychological level. Even the price of gold has reached higher where in the wake of the European debt crisis the metal has been holding back until recently. See key levels below:

FTSE 100 clears above key levels
Struggling at the 5830 – 5900 level for several weeks the FTSE 100 has finally broken through the resistance barriers. Friday has seen the index move above the 5900 level and already trading towards the 6000 level. Once the index passes the psychological barrier the opportunity to reach 6150 may not be too far away. However, unlike the US index the FTSE 100 seems to be holding back. The March highs have been cleared for the Dow Jones but the FTSE 100 is lagging which clearly shows there is a divergence taking place. A sharp pullback cannot be ruled out over the next two weeks and risk management is essential.

Dow breaks past yearly highs
In a very strong position the US Dow Jones has surpassed the April high and is trading in bullish territory. The 2007 high is not far of and could see the index reach for the 14198 target. Right now the index will need to remain above the 13338 resistance level which should technically become support. The initial support at 13060 has served well and the bullish reversal seen on 31^st August has also provided a strong energetic move for the bulls. It can be concluded that momentum to the upside remains intact until we see a shift in trend which seems less likely given this week’s strength.

Gold reaches initial upside target
Clearing $1,675 the price of Gold has reached its initial upside target of $1,770 which higher levels in sight. If the metal can remain above $1,609 then it is possible that the next target of $1,840 may be reached within two weeks. Gold had seen a very dull trading environment from May to August and after consolidating with the support level of $1,550 level being held the metal now appears to have regained strength. Last years high may be a major objective for gold and as long as bullish momentum remains intact then the longer term trend may have now resumed.