The CAC initially tried to rally during the trading session on Thursday, after gapping lower to start the futures market. We broke above the €6200 level and then turned right back around to form an inverted hammer. The CAC underperforms the DAX, but that is not a huge surprise considering that Germany is the first place where people will put money to work in the European Union. While France is not necessarily a risky place to invest, the majority of the companies on the CAC tend to be more luxury base, and therefore it is difficult to imagine that they are going to shoot straight up in the air when we have so many economic concerns.
If we were to break down below the €6000 level, then the CAC is almost certainly going to drop another €200. Ultimately, we could turn around a break above the highs of the Wednesday session, and that could open up a move to the €6400 level. The 50 Day EMA sits above and is shrinking, so I think it probably comes in to offer a certain amount of resistance as well. With this, I like the idea of fading short-term rallies that I can take advantage of, for shorting this market on a breakdown.
I do not have any interest in trying to buy the CAC until I see the DAX show signs of strength. After all, the CAC is number two when it comes to inflows in the EU, and of course as I stated previously, luxury goods are a major part of it. The market continues to be one you will probably have to trade-off of a short-term chart, you most certainly will have to trade smaller positions unless of course, you have a huge account that you can trade.
If we do see a turnaround in the DAX, I may use the CAC as a potential “catch-up trade”, but I do not see that happening right now, and it is likely that the markets will continue to offer plenty of opportunities but it may take a couple of days to cause enough of a bounce to get involved in. The markets will be noisy, but that should be something you are used to as we have been grinding back and forth in a descending channel. Money management is crucial at this point.
