The Parisian CAC 40 rallied ever so slightly during the trading session on Wednesday, as we hang about above the 6500 level. That being said, the market is likely to continue to see a certain amount of questions asked in this area, as we are starting to grind sideways through the ascending channel that has been so important for the last several months.
At this point, the market is likely to continue to see more of a sideways move in the short term, and now we have to asked whether or not this is simply the market grinding sideways and breaking out of the channel in order to take a breather, or if we are starting to see a little bit of negativity? If we break down below the 50-day EMA, it is likely that we will see more bearish pressure, perhaps opening a move down to the €6200 region. After that, the next major level is going to be the 6000 level, where the 200-day EMA is starting to reach towards. For myself, that is essentially the “floor in the market” that we should be paying close attention to. If we were to break down below there, that could open up a massive amount of selling, but obviously that is 500 euros away, so I would more than likely be short on a break above the 50-day EMA.
Just above, the 6600 level is an area where I believe there is a certain amount of resistance, and if we can break above there, then it will show the market is ready to go higher, perhaps reaching towards the highs which are close to the 6675 level. Because of this, the market is likely to see a little bit of pressure there, but breaking above there then allows the market to continue the overall uptrend and perhaps go looking towards the 7000 handle. I think it is a bit early to call which direction we are going. While I am not one to trade the CAC heavily, I am keeping an eye on it because it can give us an idea as to where risk appetite in the entire European Union may be heading, as it is the second largest index on the continent.
