A negative drift of consolidation of the past week is beginning to give way to a more risk-positive outlook forming for indices. This consolidation pattern is subsequently threatening to the upside and the buyers are looking towards the prospect of a bullish continuation pattern on the technical analysis. Bull flag patterns are threatening on the major Wall Street markets.
- The Dow futures are the closest to turning more bullish again, needing a breakout above 35,586
- The S&P 500 futures need a break above 4585 to complete a flag
- NASDAQ 100 futures have the most work to do, needs above 15,258
Dow rally looking the strongest on Wall Street
Major indices had a very tough time of it during January. Almost all (with the notable exception of a very steady FTSE 100) saw considerable corrective pressure for much of early 2022. However, they now seem to be on the recovery trail.
All of the Wall Street major indices are now ticking higher.
However, from a technical perspective, the Dow futures (MT5 code: DJ30ft) are leading the way for a Wall Street recovery. A close above key resistance at 35,586 would complete an upside break for arguably a “bull flag”. This would continue a recovery within the medium to longer-term trading range. It would also bring 36,386 (the early January high) and 36,830 (the all-time high) back into play.
Here are a few technical factors driving the market higher:
- The RSI would confirm a breakout
- A “bull kiss” on the Stochastics is a positive near-term signal.
- Pulling higher from the middle of the Bollinger Bands implies a test of the upper Bollinger Band (currently around 36,200)
The near-term support band between 34,670/35,000 is increasingly strong as a basis for the next leg higher.
S&P 500 futures are increasingly positive too
After drifting back in recent days, the S&P 500 futures (MT5 code: SP500ft) also look ready to break higher. A strong candle yesterday and a positive early move today are now pulling the market towards a test of what is a key historic pivot band at 4550/4585.
Momentum on the RSI is looking to pick up above 50 (moving into a more positive configuration). As with the Dow futures, we also see strengthening Stochastics following a “bull kiss” too.
Holding above 4513/4532 support on the intraday chart will continue the improvement. However, we look for a closing breakout above 4585 to complete the flag pattern. This would imply gains towards the next resistance areas at 4670 and potentially 4740. For medium-term positions, this would also leave 4438 as a key higher low.
NASDAQ 100 futures improving, but less convincingly
Finally, turning to the NASDAQ 100 futures (MT5 code: NAS100 ft) we see a far less developed outlook for recovery:
- Technically, the RSI is still below 50 on the daily chart.
- Whilst the Stochastics are ticking higher, there is less of a decisive bullish configuration.
- There is no obvious bull flag pattern configuration
We are also mindful of the importance of the resistance band sitting at 15,260/15,500. This is a crucial area of overhead supply that could begin to restrict recovery. There is good support now forming at 14,360/14,450 but there is also much more that needs to be done to form a sustainable recovery on NASDAQ futures. Subsequently, we much prefer the set-up on the Dow futures and S&P 500 futures at this moment.
