CAC, DAX and SMI Forecast – European Indices Showing Potential Exhaustion

CAC 40 Technical Analysis

European indices are struggling a bit on Friday. The CAC 40 in Paris looks like it is rolling over a little bit, partly due to some inflationary headwinds in France. There is a little bit of an issue with luxury and retail during the session showing signs of hesitation. Ultimately, though, this is a market that I think will try to pull back towards the 8,500 level and find quite a bit of support, assuming we even drop that far. In other words, this is just a pullback in a strong uptrend waiting to happen. I don’t think it is a deep correction coming to Paris.

DAX 40 Technical Analysis

The DAX 40 in the Friday session has been a bit of a positive mover, but Germany is struggling to hang on to the gains. We have filled the gap twice now, from several weeks ago, and there has been a general grind higher after the tariff decision in the Supreme Court in the United States. At the end of the day, it looks like that is still going to be an issue one way or another.

With the tariff shock from the US Supreme Court giving a little bit of a boost, you have to ask who the big winners are here. Right now, it looks like Siemens Energy and perhaps Deutsche Telekom are offsetting some weakness in one of the other larger companies, BASF. Ultimately, I think this remains a buy on the dip situation as well, with 25,000 euros becoming particularly interesting.

SMI 20 Technical Analysis

The Swiss Market Index, the Swiss 20 if you will, is definitely very strong. It has rallied quite a bit over the last several weeks as pharmaceuticals tend to be one of the big winners here. We also have to keep in mind that the tariff situation between the United States and Switzerland coming down drastically from 39% to just 15% opens up the door for Novartis and Roche and some of the pharmaceutical sector in Switzerland to do fairly well.

Furthermore, if the US Treasury yield continues to drop a bit, sometimes some of these higher-flying dividend payers in Switzerland attract European money managers. It is also a play on interest rates. All things being equal, this is a market that if we do pull back, I think there is plenty of support probably at 13,800 Swiss francs and almost certainly followed by 13,600 Swiss francs.

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