Indices look for additional gains after Thursday’s US recovery

​FTSE 100 targets February highs

The index has shrugged off the weakness from the middle of the week, rallying off the lows of each of the preceding three sessions, and is now on course to head back to the February highs at 7700.

It has done much better than its continental European peers of late, recouping most of the ground lost in the February and March drop, and avoiding any indication of a fresh turn lower.

Renewed bullish momentum would seem to beckon, especially once the index breaches the February highs. From here the 2018 record high at 7903 becomes the next major target, a remarkable recovery both from the March 2022 low and from the sub-5000 level seen during the pandemic.

DAX supported by dip buyers

The buyers have come in to rescue the DAX from further declines it seems, at least for now.

The pullback from the late March high appears to be halted, with the index finding support at 14,130. A recovery off this level then brings the 14,840 level into view, while a move above this will continue the recovery of losses suffered in February.

Sellers will need to see the price drop back below this week’s lows at 14,026, which would revive expectations of further losses and suggest that the high from late March is a lower high and part of a bearish trend.

European markets continue to struggle due to their closeness with the Russian economy, and fears that the conflict in Ukraine may yet spread.

While the FTSE 100 has benefited from its heavy oil and mining contingent, companies in the DAX are feeling the effects of higher prices and tighter supply, which continues to squeeze margins.

S&P 500 pushes higher after late rebound

A recovery for the S&P 500 yesterday has meant that the price has opened back above the 200-day simple moving average (SMA), reversing some of the bearishness that had been building since the pullback from the late March high.

Additional gains here now target the record highs from January at 4800. For now the bearish view has been put into abeyance, with a move back below this week’s lows at 4450 needed to suggest a fresh move to the downside.

US earnings season is fast approaching, and while further growth is expected, investors will be on watch for commentary about inflation, squeezed margins hurting profitability, and weakness in consumer spending due to the higher price of essentials.

Now that the immediate post-pandemic rebound is out of the way, the question is whether indices can sustain themselves at these levels or whether the worsening economic outlook will make further upside difficult to achieve.