ETFs
French Stock ETF Looks Set to Resume Uptrend After Election, Charts Show
The French stock market has been subject to volatility surrounding political news, leading to a sharp pullback in June. The CAC 40, the main benchmark, has corrected nearly 10% since its March peak. Despite this pullback, a primary uptrend remains in place for the CAC 40, in addition to the associated iShares MSCI France ETF (EWQ). Both proxies for French stocks appear to be finding their balance, suggesting that the market is welcoming the latest election news. Once the final outcome is determined, it would be natural for investors to react favorably to the removal of uncertainty, especially given the oversold status of French stocks. The CAC 40 has been a source of underperformance relative to the S&P 500 for over a year, but the ratio appears too stretched to the downside. Our short-term indicators are showing signs of downside exhaustion and the downtrend 200-day moving average resistance is well above current levels. This suggests that a countertrend phase of outperformance is possible for French stocks versus US stocks. Note that US-listed EWQ stock is in a long-term uptrend according to the cloud pattern, indicated by the shaded area on the chart. The cloud places support near $36.80, above which the cyclical uptrend that started from the 2022 low can be considered intact. The cloud pattern is increasing through the end of the year, signaling that the long-term uptrend is likely to remain in force. The recent stabilization of many French stocks shows a positive reaction to the widespread oversold conditions in the medium term, which we assess using the weekly stochastic oscillator. The Stochastic Oscillator has moved from oversold levels in EWQ, and near-term momentum has improved significantly, providing a positive technical catalyst that suggests a bounce is likely. The largest holding in EWQ is LVMH Moet Hennessy Louis Vuitton (LVMUY), which represents about 11% of the ETF. LVMUY is showing signs of downside exhaustion near key support, a natural place for a bounce, which would be constructive for French benchmarks. Additionally, French energy giant TotalEnergies (TTE) has a medium-term oversold buy signal that suggests its correction has matured. —Katie Stockton with Will Tamplin Access Fairlead Strategies’ research for free here. DISCLOSURES: (None) All opinions expressed by CNBC Pro contributors are their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent or affiliated companies, and may have been previously broadcast by them on television, radio, the Internet or in any other 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 CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE, OR A RECOMMENDATION TO PURCHASE 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 MAY NOT BE SUITABLE FOR YOUR PARTICULAR SITUATION. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD STRONGLY CONSIDER SEEK ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here to read the full disclaimer.