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 .
