The CAC 40 rallied again during the trading session on Tuesday as the market is above the 6700 level. Furthermore, we have recaptured the previous uptrend line that had recently been broken through to the downside, showing a nice recovery in this luxury-driven index. The market has also made a fresh, new high, which is a bullish sign as well.
The question now is not so much as to whether or not we are still in an uptrend, but whether or not we are going to continue to pay attention to the 6600 level underneath. With the gap that we started the week with on Monday, I do suspect that it is now going to be “floor in the market”, unless something drastically changes. Furthermore, it is also worth noting that the euro has been historically cheap as of late, so it does make sense that Paris would rally right along with other European indices.
To the upside, the 6800 level is a short-term barrier, but I think before it is all said and done, we will go looking towards the 7000 handle more than anything else. This is a market that I think will continue to find plenty of buyers on dips, and as a result of the 50 day EMA reaching towards that 6600 level, there is plenty of support underneath. That being said, if we were to see some type of breakdown below the 50-day EMA, then we could go looking towards the 6400 level, but I think we would need to see some type of major “risk off event” in order to have that happen.
In general, we will continue to see a lot of short-term “buying the dips,” especially as people try to pick up a bit of the overall trend that we have seen. This is a market that continues to see a lot of choppiness, but we may have the fear of being a little bit overextended in the short term. Given enough time, we will certainly go higher based upon what we have seen over the last several weeks, which I do believe continues to see more follow-through simply based upon the fact that bonds offer so little in the way of return.
