CAC Forecast: Back Towards the 50 Day EMA

The Parisian index gapped lower to kick off the trading session on Monday, as we are seen a massive amount of negative pressure on indices around the world. The CAC of course will be hit especially hard, as it is highly sensitive to what happens with luxury spending. The market did recover back towards the €6600 level, but at this point in time the gap could get filled but should in theory offer quite a bit of resistance.

The size of the candlestick is relatively negative, and because of this I think it is only a matter of time before we drop towards the €6500 level, and looking at the uptrend line, that also gives yet another reason to think that we would find buyers. That level will probably be very difficult to break through, and I would not be surprised to see that level hold up heading into the weekend. The real question is what happens next week? At this point, it looks as if we will continue to see weakness, at least in the short term. If we were to break down below the uptrend line and the €6500 level, it is very likely that we could go looking towards the 200 day EMA, which is currently sitting at the €6115 handle. As long as we can stay above the 200 day EMA, you can still at least make a somewhat valid argument for remaining in an uptrend.

If we were to turn around and take out the €6800 level to the upside, it is very likely that the market could go looking towards the €7000 level finally. This is a pretty sharp pullback, but ultimately, we have not changed the overall trend although it certainly looks as if we are threatening to do so. Pay close attention to the fact that it has decidedly gone “risk off” around the world, because despite the fact that the Euro has lost value, people are not looking at the possibility of “cheap French exports” lifting the market. As long as that continues going forward, we will continue to see sellers. I would anticipate a lot of choppy behavior, but at this point in time I certainly would not be a buyer unless we get a daily candlestick that gives us some type of hope.