CAC 40 Forecast: Parisian Index Looks Overextended

As long as traders are looking to put money to work, the CAC should do quite well in general.

The CAC fluctuated during the trading session on Tuesday as it starts to run out of steam just above the 6800 level. The market has been on a tear to the upside for almost 3 weeks now, and it looks like the market could struggle to continue going higher, which I think would be the healthiest thing that this market could do.

Keep in mind that the CAC does tend to move right along with luxury goods, and the idea of the wealthy continuing to spend on luxury brands is something that might be a bit counterintuitive, but it is something that we have seen happen over the last several months. With that being said, you will notice that I have drawn a massive uptrend line on the chart that we had been following for some time. However, we broke down below it and then back above it, which shows just how powerful this recovery has been. In general, I believe this is a market in which you will continue to buy the dips and, but you do not necessarily need to do it at the sides.

Underneath, I believe the 6600 level will probably continue to offer a bit of support, mainly because it had been so important in the past. Beyond that, the 50-day EMA is now sitting at the 6550 handle, which is rapidly reaching towards the 6600 level. Because of this, I believe that the market will continue to see a certain amount of momentum return to it in that general vicinity, but if we were to break down below the 6600 level, that could cause some issues. At that point, I think we would probably would go looking towards the 200-day EMA which is sitting near the 6065 region. Underneath there, we have the 6000 level, which obviously should be a bit of a “floor in the market” due to the psychology of that level.

The CAC tends to move with the risk appetite around the world, so multiple indices should be watched right along with the CAC, including the DAC and the IBEX. As long as traders are looking to put money to work, the CAC should do quite well in general.

CAC 40 Index

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.