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The French stock market has been subject to volatility surrounding political news, resulting in a sharp pullback in June. The CAC 40 , the primary benchmark, has corrected nearly 10% since peaking in March. Despite the pullback, a primary uptrend remains in place for the CAC 40, in addition to the related iShares MSCI France ETF (EWQ) . Both proxies for French stocks appear to be finding their footing, which suggests that the market is welcoming the latest news regarding the election. Once the final outcome is determined, it would be natural for investors to respond favorably to the removal of uncertainty, particularly given the oversold status of French stocks. The CAC 40 has been a source of underperformance versus the S & P 500 Index for more than a year, but the ratio appears overstretched to the downside. There are signs of downside exhaustion from our short-term indicators and resistance at the downtrending 200-day moving average is well above current levels. This suggests a counter-trend phase of outperformance is possible for French stocks versus U.S. stocks. Note that U.S.-listed EWQ is in a long-term uptrend per the cloud model, denoted by the shaded area on the chart. The cloud puts support near $36.80, above which the cyclical bull trend that began off the 2022 low can be considered intact. The cloud model rises through year-end, signaling that the long-term uptrend is likely to remain in force. Recent stabilization in many French stocks shows a positive reaction to widespread intermediate-term oversold conditions, which we gauge using the weekly stochastic oscillator. The stochastic oscillator has turned higher from oversold levels for EWQ, and short-term momentum has improved notably, providing a positive technical catalyst that suggests a rebound is likely in store. The largest holding in EWQ is LVMH Moet Hennessy Louis Vuitton (LVMUY), which makes up roughly 11% of the ETF. LVMUY shows signs of downside exhaustion near key support, a natural place for a rebound, which would be constructive for French benchmarks. Additionally, French energy giant TotalEnergies (TTE) has an intermediate-term oversold ‘buy’ signal that suggests its correction has matured. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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