- The Parisian index has rallied a bit during the trading session on Tuesday as we are now well above the €7000 level.
- In fact, we are starting to threaten the €7100 level, and therefore the top of a cluster from this time last year.
- If we can continue to go higher, then this will probably drag a lot of the other European indices higher with it as the CAC 40 is one of the bigger ones in the European Union.
Central Bank Liquidity Is a MajorIssue for this Market
The 50-Day EMA is currently sitting at the €6700 level and rising. I would point out that there is a previous resistance barrier right around €6800 that could light up quite nicely with that indicator on some type of pullback. It does not look like this is a market that you want to short, due to the fact that stock indices typically go higher over the longer term anyway. Furthermore, the question then becomes about central bank liquidity. Equity traders around the world are looking for the first signs of trouble coming from a central bank, that will be answered the same way they always answer: by liquefying everything.
Either way, this is a market that has stretched itself quite drastically, so I think at this point you are looking at a market that will eventually have to offer itself a little bit of breathing room, because simply blowing through the ceiling is very unlikely in a market like this that has to worry about quite a bit of other issues. After all, the CAC 40 index is highly levered to luxury goods, and high-end spending. As long as that is the case, then we will have to look at this through the prism of the global economy, and therefore I am a bit concerned about chasing this. That being said, I could see a situation where I’d be willing to buy it near the €6800 level, assuming that we get that pullback. We will have to wait and see how the market behaves in that area, but it could be a good place to pick up a bit of value.
Alternatively, if we break above the €7200 level, then it means that the CAC will continue to go higher, and perhaps even end up somewhere in the neighborhood of €75. I don’t like the idea of taking that trade though, just because there are easier markets to trade at this point.
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