Technical Analyst, Saxo Bank
Summary: AEX25 within cents to test key resistance forming a Rising wedge pattern. Correction looming
BEL20 still range bound in tighter and tighter range. Wait for break out
CAC40 possible Rising Wedge pattern close to test all-time high. Uptrend very stretched
Today's Market Quick Take from the Saxo Strategy Team
AEX25 keeps crawling higher and is closing in on resistance at 772. AEX was actually only a few cents from testing it yesterday but slipped at the end of the day.
The Index is forming a rising wedge like pattern and there is short-term RSI divergence indicating uptrend is stretched and weakening. A correction is looming. But the trend is your friend – higher highs and higher lows.
However, if today ends on a negative note we could have a top and reversal pattern in place. Yesterdays candle was a Shooting Star candle and if it is followed by a bearish one we have a top and reversal in place. If not we could see AEX have a go at the 772 resistance. A close above 772 next resistnace at around 812
If AEX closes below short-term rising trendline it could be first indication of a correction unfolding.
First test would be 750 but key support at around 735.
BEL20 still range bound as described last week between 3,962 and 3,819. https://www.home.saxo/content/articles/equities/technical-analysis-dax-aex25-bel20-cac40-06022023
The Index seems to be trading in a more and more narrow range however, forming what could be a symmetrical triangle pattern.
The Bearish Engulfing candle back in January signals top and reversal but it has not yet been confirmed. Break out from the triangle could be first clue of the range break out direction.
Bullish break out there is strong resistnace around 4,012-4,031
Bearish break out support at 3,819 and around 3,700
CAC40 is moving in what could be a rising wedge (dark blue lines) – not yet confirmed though. If CAC40 moves above upper rising trendline it is not a wedge, and there is room up to resistance at the all-time high around 7,384. A test of all-time high seems likely.
Short-term support at 7,074. If CAC40 closes below that level it has also closed below very short-term lower rising trendline and a sell-off down to strong support at 6,946 is likely
Since RSI is not performing higher values it is building divergence strongly indicating uptrend is stretched and a correction is looming.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
2024: The wasted year
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.
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.