DAX 40 Breakout Fuels European Market Hopes, CAC 40 Lags

Global stock markets concluded 2025 with significant gains, leaving investors and traders to ponder a common adage: markets can advance longer than many expect, even as a sense of vertigo begins to set in. This principle does not invalidate recent rallies but underscores the need for discipline and close observation of major financial centers, particularly Frankfurt and Paris, which often signal significant market shifts in Europe.

Against this backdrop, the Ibex 35 continues to project strength, starting the new year with the same robust momentum it displayed throughout 2025. A new ally has emerged in the form of the DAX 40, which has entered an “absolute free ascent,” the most bullish technical situation possible. The German index had been confined within a broad lateral range since June last year, accumulating energy. This week, it decisively broke the near-perfect equilibrium between supply and demand by surpassing the 25,000-point ceiling.

“The fact that the index has resolved this situation upwards, and has done so following a preceding bullish trend, suggests an optimistic short-term scenario for 2026, opening the door for an assault on 26,500 points, representing an additional upside of nearly 6.5%,” stated Joan Cabrero, technical analyst and strategist at elEconomista.es.

The DAX 40’s breakout, however, comes with a caveat: the French CAC 40 has yet to challenge analogous resistance at 8,330 points, which marks the ceiling of its own extensive consolidation. “This is necessary to ensure the sustainability and reliability of a potential breakout in Frankfurt,” Cabrero added. This remains the sole formality for European bulls to fulfill before aspiring to a new upward leg in 2026.

The Ibex 35, for its part, shows no immediate signs of buyer exhaustion, though its impetus at the start of 2026 is somewhat less pronounced compared to its performance through 2025. This dynamic could shift if Paris joins the rally.

“For signs of buyer exhaustion to emerge, the minimum requirement is for the Ibex 35 to close a week below the lows of the previous week, something that has not occurred in over a month and a half,” Cabrero explained. He noted that the current week’s lows and the first support level to monitor are at 17,440 points, with the previous week’s lows at 17,140 points.

Meanwhile, broader market sentiment reflects a pause. “Markets are taking a breather after a strong start in 2026, and no one wants to add new risks ahead of Friday’s U.S. employment report,” Charu Chanana, Chief Investment Strategist at Saxo Markets, told Bloomberg. Chanana highlighted that ADP Research data released Wednesday had put the market on alert by revealing a December increase in private payrolls that fell short of economists’ estimates.

The comprehensive December employment report from the Department of Labor is scheduled for release on Friday, marking its return to the regular timetable for the first time in several months following a six-week U.S. government shutdown that disrupted economic data collection starting in October.