European stocks surge into overbought territory

Key points

• European indices, specifically the UK's FTSE 100 and France's CAC 40, have surged to record highs on the back of positive domestic data and easing geopolitical trade fears.
• Breadth indicators for the FTSE 100, including the percentage of stocks above their 10-day, 50-day, and 200-day moving averages, have expanded into overbought territory, historically signaling further medium-to-long-term gains.
• The CAC 40 is mirroring this strength, with its breadth metrics also hitting overbought levels, producing positive historical win rates.
• The Relative Strength Index (RSI) for the CAC 40 has crossed above 72. Contrary to traditional "overbought equals sell" logic, this strong momentum has typically been a bullish continuation signal.

A breakout in European equities

European stocks traded higher on Friday, bolstering investor confidence as both the London FTSE 100 and Paris CAC 40 indices hit record highs. The London market finished strongly, lifted by a dual tailwind of positive UK economic data and the U.S. Supreme Court's ruling striking down Trump's global tariff plan. The FTSE 100 ultimately closed up 59.85 points, or 0.6%, at 10,686.9.

As the broader market moved higher, the market breadth indicator (FTSE Breadth % > 10 Day Avg) climbed