Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - CAC40 in downtrend. How low can it go? AEX25 and SMI20 uptrends are stretched, reversals or extensions?
Kim Cramer Larsson
Technical Analyst, Saxo Bank
AEX 25 is struggling to build on the bullish trend and get past 928.
The index has been trading in a rising channel-like pattern that seems to be turning into a rising wedge-like pattern.
If AEX manages to break above 928, there is upside potential to 935–940 short-term, and the potential rising wedge-like pattern will be demolished.
A daily close below 927 could fuel a sell-off down to around 900. A daily close below the lower rising trendline and below 897 will confirm the rising wedge reversal pattern with downside potential to 858–850.
The bullish trend is weakening as illustrated by the declining RSI, i.e., divergence. For this trend exhaustion picture to be reversed, a daily close on RSI above the upper falling trendline is required combined with an index close above 928
NETH25 CFD forming a rising wedge-like pattern. RSI is indicating uptrend exhaustion, but if NETH25 breaks above 927, there is potential up to around 935–940.
A break below 916, and NETH25 is likely to test the lower rising trendline. A close below 897 could add to the selling pressure down to around 883
A break below 916, and NETH25 is likely to test the lower rising trendline. A close below 897 could add to the selling pressure down to around 883
CAC40 closed yesterday below support at 7,812, thus closing the gap from February earlier this year. A double top pattern has been confirmed with downside potential to 7,553.
However, due to the fact that the double top pattern is not perfect—the valley in the middle is almost two minor valleys—the downside is likely to be cut short to around 7,700.
A bearish trend is confirmed with lower lows and lower highs, and the strength indicator RSI is below the 40 threshold, i.e., in negative sentiment.
The next key support area for CAC40 is 7,724–7,691. A daily close below 7,691 could see further selling pressure down to strong support at around 7,553. The rising 200 daily moving average will give some support, possibly limiting the downside for CAC40. If CAC40 closes above the peak of yesterday, i.e., above 7,932, it neutralizes the current bearish trend picture.
FRA40 CFD closed just above the 0.50 retracement and, more importantly, above key support at around 7,775.
If sellers come back pushing FRA40 below yesterday's low at 7,757, it could further fuel a sell-off down to 7,682, possibly down to strong support at 7,568. A daily close above 7,935 will neutralize the current bearish picture
SMI20 has formed a doji evening star-like top and reversal pattern (circled). RSI divergence (RSI values declined when the index climbed higher) is indicating uptrend exhaustion.
SMI is at a steep rising trend line and support at 12,046. A close below both could fuel a sell-off down to support at around 11,772.
However, the bullish trend is currently still intact and buyers are likely to try resuming the uptrend. A daily close above 12,295 will extend the bullish trend towards the 12,560 resistance level.
SWISS20 CFD: Doji Evening Star top and reversal pattern.
Tested the 0.50 retracement of the past two weeks’ bullish move and the lower rising trendline.
A daily close below the trendline and below 12,024 is likely to fuel a sell-off down to around 11,870–11,754. A daily close above 12,295 will cancel the top and reversal pattern and extend the uptrend towards 12,560
Tested the 0.50 retracement of the past two weeks’ bullish move and the lower rising trendline.
A daily close below the trendline and below 12,024 is likely to fuel a sell-off down to around 11,870–11,754. A daily close above 12,295 will cancel the top and reversal pattern and extend the uptrend towards 12,560
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