We would have to have a major “risk-on rally” globally to make the CAC start to take off to the outside in any type of sustainability.
The French CAC Index initially tried to rally to reach the €6100 level. The €6100 level has been a bit of resistance over the last week or so, so it’s not a huge surprise to see that we pulled back from it. At this point, the market looks as if we are going to test the $6000 level, which is a large, round, psychologically significant figure. The €6000 level is an area that a lot of people will be paying close attention to, but quite frankly there is an even bigger support level underneath.
The €5800 level underneath is a massive area of support where we have formed a little bit of a double bottom recently, and if we can break down below there, the CAC will unwind quite drastically. If we were to break down below that level, then the market could really start to fall apart at that point. France is going to lead the way lower for the major indices from what I can see, especially considering that a lot of people are going to be cutting back from luxury goods, which is a huge driver of the index itself.
If we were to turn around and break above the €6100 level, then it’s possible that the market could look to the 50-day EMA for the next resistance area, near the €6300 level. The €6300 level is an area that could be of interest due to that indicator, and as result, I think technical traders may pay attention to it. The 50-day EMA indicator and the 200-day EMA indicator are spread out rather far, suggesting that we do have plenty of moments and to the downside, and there will be plenty of sellers willing to jump in. At this point, I think that if the CAC rallies, you have to be looking towards signs of exhaustion as a reason to start jumping on the market again. As far as buying the CAC is concerned, it’s difficult to imagine doing so until we break above the 50-day EMA at the very least. The trend could change quite drastically if we break above the €6600 level, which is going to take a lot of momentum and effort. We would have to have a major “risk-on rally” globally to make the CAC start to take off to the outside in any type of sustainability.