Technical Analyst, Saxo Bank
Summary: LVMH is the biggest constituents in the CAC 40 Index. Both are short-term range bound but medium-term LVMH uptrend seems strong but is that enough to lift toppish looking CAC40 higher?
CAC40 peeped just above the previous all-time highs at around 7,385 but didn’t manage to close above.
RSI is showing divergence suggesting the uptrend is weakening and a correction is in the cards.
If CAC40 closes below the lower rising trendline and below 7,187 a swift sell-off down to support at around 6,946 could be seen
A close below that level CAC could be in for further downside. Next support at around 6,379.
Medium-term CAC40 has been trading in a steep rising channel since Q4 2022. Divergence on weekly chart suggests the uptrend is exhausting and CAC40 could face a correction.
However, a clear top and reversal pattern has not yet emerged but if CAC closes this week below 7,243 we will have just that. A close below the lower rising trendline could also be a signal of a correction.
A close above 7,400 will likely mean the uptrend is likely to continue higher towards 8K.
LVMH is short-term range bound between 830 and 775. Break out is needed for direction. A close below 775 could hit LVMH with a sell-off below the 55 daily Moving Average down to support at around 737.
However, medium-term LVMH is in an uptrend with no RSI divergence indicating higher levels are likely. The share price is trading in a rising channel and if LVMH closes above 830 share price would be looking at 885-930 level.
A bearish breakout of the channel i.e., a close below lower rising trendline – and below support at 775 – the correction picture could be unfolding. First indication of this scenario to play out could be if RSI closes below 60 threshold and its rising (blue) trendline.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.