Technical Update - CAC40 in downtrend. How low can it go? AEX25 and SMI20 uptrends are stretched, reversals or extensions?

CAC40 closed yesterday below support at 7,812, thus closing the gap from February earlier this year. A double top pattern has been confirmed with downside potential to 7,553.

However, due to the fact that the double top pattern is not perfect—the valley in the middle is almost two minor valleys—the downside is likely to be cut short to around 7,700.

A bearish trend is confirmed with lower lows and lower highs, and the strength indicator RSI is below the 40 threshold, i.e., in negative sentiment.

The next key support area for CAC40 is 7,724–7,691. A daily close below 7,691 could see further selling pressure down to strong support at around 7,553. The rising 200 daily moving average will give some support, possibly limiting the downside for CAC40. If CAC40 closes above the peak of yesterday, i.e., above 7,932, it neutralizes the current bearish trend picture.

FRA40 CFD closed just above the 0.50 retracement and, more importantly, above key support at around 7,775.

If sellers come back pushing FRA40 below yesterday's low at 7,757, it could further fuel a sell-off down to 7,682, possibly down to strong support at 7,568. A daily close above 7,935 will neutralize the current bearish picture

SMI20 has formed a doji evening star-like top and reversal pattern (circled). RSI divergence (RSI values declined when the index climbed higher) is indicating uptrend exhaustion.

SMI is at a steep rising trend line and support at 12,046. A close below both could fuel a sell-off down to support at around 11,772.

However, the bullish trend is currently still intact and buyers are likely to try resuming the uptrend. A daily close above 12,295 will extend the bullish trend towards the 12,560 resistance level.