The CAC Index gapped a bit higher to kick off the trading session on Wednesday but gave back those gains to turn around and form a shooting star. Nonetheless, I think at this point the market is going to continue to drop from here. If we break down below the long red candlestick on Tuesday, then it should send the CAC much lower, reaching towards the €6400 level. After that, the market would go looking towards the 200-day EMA which is sitting at the 6250 region.
It is worth noting that we had sliced through the downtrend line quite drastically and have even pulled back from that level, showing signs of hesitation. Nonetheless, this is a market that I think is going to continue to see a lot of downward pressure, but if we were to turn around and break above the 50-day EMA, then it is likely that the market could go higher. In general, this is a market that is going to continue to be very noisy, as there is a lot of confusion out there around the world.
When you look at the candlestick from the Tuesday session, it does suggest that there is quite a bit of downward pressure and momentum. If we break down from here, I think it will continue to attract more inflows to the downside and could really start to kick off downward momentum. The market has been trying to form a bit of a topping pattern, so I think it is only a matter of time before that kicks off. Furthermore, you also have to keep an eye on the fact that the DAX is highly levered to luxury goods, with the exception of Airbus.
As long as indices around the world struggle a bit, the CAC will more than likely continue to be very noisy. If we did turn around and break to the upside, the CAC will follow right along with the DAX and others. This is a market that I think will be noisy in general, but you need to pay close attention to the indices across the continent.
