SMI sends positive signals

Price at time of writing – 8367.

In a pattern similar to many of Europe’s markets, the Swiss market index has established foundations which may lead to a major upside breakout.

As with all global share indices, the SMI established its major low in March 2009. Since it broke cleanly above the line representing a 50% advance from this low – which occurred in August 2012 – the index has been targeting 8470, a level that would complete a 100% rise. This target was fulfilled in January this year, and retested again last month. The SMI is currently residing around 100 points beneath this major resistance.

Despite this major target having been achieved, the behaviour of the index following its most recent retest is sending positive signals. Last May, as the SMI approached this resistance on its first attempt, a rapid correction took place that eventually measured 12.5%. After successfully hitting 8470 in January, the index again took fright, rapidly falling 6% soon afterwards. However, following the latest retest the index has traded calmly and shows no obvious signs of intimidation. This bodes well for the future. Any break above 8470 can now be used as the trigger to buy the index. 

Recommendation: neutral. Buy on a break above 8470. The index will then trade immediately to 8674, before pausing. Ultimately, longer-term targets are beginning to emerge in the band 9390-9520.

SMI index chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.