#DAX & #CAC40 Forecast (4 June 2024)

DAX Forecast: Gives Up Initial Gains on Monday

• The DAX initially rallied during the trading session on Monday, but then melted down after the PMI miss in the United States has everybody banking on the idea that the economy is going to collapse, and we will all be dead in a week.
• Obviously, this is hyperbole, but at the end of the day, that’s essentially how the market is behaving.
• With that being in mind, I think that those who are going to be a bit patient will probably be rewarded for that patience.

DAX Will Lead the Way

The DAX will lead the way for the rest of the European indices, and I think you should continue to look at the DAX as the “bellwether index” for the European Union. After all, Germany is by far the biggest economic engine on the continent, and I think a lot of people will look at it through that prism. With this, I like the idea of buying the DAX on these dips, because I do think that it is probably only a matter of time before people start focusing on the idea of Germany and the rest of the European Union exiting a recession.

You should also keep in mind that war is an excellent profitable opportunity. While it is callous to say this, the reality is that the European Union will continue to get a bit of an economic boost from the war in Ukraine, as it helps with the military industrial complex, and of course a lot of exports. Governments are spending massive amounts of money on armament orders, and of course the idea that the economy is going to continue to benefit from government spending overall, and therefore I think you will continue to see a lot of inflation of asset prices. After all, that’s the only game the central bank is not a play, and therefore one would assume they will continue to go back to that playbook.

Underneath, if we were to break down below the €18,250 level, I think at that point in time you will have a lot of people looking for support, right along with the €18,000 level underneath that. In other words, this remains a “buy on the dips” market.

CAC 40 Forecast: Falls to Kick Off the Week

• The Parisian CAC 40 has initially tried to rally during the early hours on Monday but has given back up the gains rather quickly, as the market has struggled with the 50-Day EMA, and of course we have a major situation where traders are looking at this through the prism of whether or not the support holds.

That support, the €7900 level has been very important multiple times, I think that will continue to be the case going forward. As long as we can say above the €7900 level, I think there is a real shot at going higher over the longer term. That being said, if we were to break down below the €7900 level, then we could see the market dropping down to the 200-Day EMA, closer to the €7700 level.

CAC Means Luxury

When you look at the Parisian CAC, you are more or less looking at an index of luxury brands. While a shrinking euro has a major influence on exports, it’s also worth noting that this is a statement on the state of the wealthy in the European Union and beyond. At this point, it looks like the wealthy are still doing fairly well, and as long as that’s going to be the case, a lot of the companies on the CAC 40 will continue to benefit.

Looking at the chart, we are just simply in the consolidation area between the €7900 level underneath, and the 8250 euros level above. I think this continues to be the case, and quite frankly I don’t have any interest in shorting this market, or any other index at this point due to the fact that it’s likely central banks around the world will continue to look toward loosening monetary policy. Speaking of which, the European Central Bank is almost certainly going to be cutting soon, perhaps even as soon as just a few weeks are now. That should continue to boost European stocks in general, and then by extension the CAC in Paris.

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