Bullish signal on US indices - what lies ahead?

Over the past few months, US indices have mostly been moving sideways. Yes, they’ve made new highs a couple of times — but each time, the move lacked follow-through.

The clearest example was the DJIA breakout attempt on 6th February. It printed a strong bullish candle and closed outside the range. But the move didn’t sustain. Within a few sessions, price slipped back into the range — what we call a buy failure.

Typically, a buy failure is a strong sell signal that can lead to a sharp move in the opposite direction. However, the signal lacked selling momentum and instead, the market tightened into a small range over the last five days.

Last Friday, we saw a bullish engulfing candle form at the lower boundary of this tight range. This came after the US Supreme Court rejected the tariff increase proposed by the Trump administration. The news flow clearly helped sentiment.

The latest setup is interesting. If price does break out, it would mark a second breakout attempt (usually more reliable) from a 1.5 month long range and also a breakout from a small double bottom that could add conviction to the upside.

DJIA Futures daily chart showing a Bullish Engulfing candle in a double bottom formation

The S&P, which has heavier tech weightage, has been relatively weaker compared to DJIA and has been stuck in a broader range for 4–5 months. However, Friday’s price action was similar to DJIA, with a small 1-2-3 bottom pattern close to a breakout.

S&P Futures daily chart showing a Bullish Engulfing candle in a 1-2-3 bottom formation

On the other hand, Europe has been much clearer. FTSE’s weekly chart has respected a rising trendline for nearly 10 months, and the slope has steepened over the last two months.

FTSE index weekly chart showing a 10 month rising trendline

Meanwhile, Stoxx Europe generated a strong buy signal last Friday with a second breakout from an ascending triangle on the daily chart.

Stoxx Europe daily chart showing a 2nd breakout from an ascending triangle

So the key question now is:

❓ Will US indices finally break out and follow Europe’s lead?

❓ Or will they continue to drift inside their multi-month range?

Much will depend on how the tariff situation evolves over the next week — and more importantly, how markets interpret it. Only time can tell.

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