At this point, it certainly looks as if there should be plenty of support underneath, so I do favor the upside if we break out.
The Parisian index has rallied a bit during the course of the trading session on Thursday, as we continue to hang around the 50 day EMA. The 50 day EMA is an indicator that has been rather predictive in this market, as it has been slumping higher and has also offered quite a bit of support multiple times. Because of this, the market is going to be very noisy in this general vicinity.
To the upside, the 6800 level is an area that should offer a bit of resistance, and if we reach there it is likely that we could see a bit of trouble. A break above that level would obviously be a very bullish sign and could send this market looking towards the 7000 handle over the longer term. As things stand right now, the 7000 level is my target, but obviously we have to worry about whether or not we can hold this trend line. Furthermore, the CAC is highly levered to luxury goods and therefore consumer spending will be paramount.
On the other hand, if we were to break down below the uptrend line and the 6600 level, then it is likely that the market could go looking towards the 6400 level, possibly even down to the 200 day EMA which is currently sitting just above the 6200 level. This is a market that certainly looks as if it could go to the upside, and it should be noted that the US indices recovered quite nicely late in the day on Thursday, so that could suggest that we have further to go in this index.
Another thing that we need to pay close attention to is the Euro, as a falling Euro does make exports coming out of France much cheaper for the rest of the world. At this juncture, if we do break down below the 6500 level then I would probably get short of this market but also recognize that getting below the 200 day EMA probably takes a lot of work. The CAC of course is something that you need to pay close attention to for other markets as well, including the DAX and FTSE. At this point though, it certainly looks as if there should be plenty of support underneath, so I do favor the upside if we break out.