The CAC 40 fell a bit on Monday to reach down towards the 6660 handle, but has shown some support as we are getting close to the 50-day EMA. The 50-day EMA is starting to turn a little higher, and I think that could offer a little bit of support. That being said, it is obvious that we are trying to form some type of move to the upside and break resistance, so it is likely that we could go looking towards the 6900 level given enough time.
If we find the 50-day EMA supportive enough, then we will continue the overall long-term uptrend. The French index looks relatively strong longer term, and I do think that it is probably only a matter of time before we go to the 7000 handle. The 7000 level will be a large, round, psychologically significant figure that attracts a lot of attention, and I think it will cause a lot of headline noise. That being said, the market breaking above there is probably only a matter of time based upon what we have seen.
On the other hand, if we were to turn around and break down below the 6600 level, which would by extension open up the possibility of selling pressure underneath to go looking towards the 6400 level, I might be a seller. The 200-day EMA is at the 6288 level, and it suggests that there would be a bit of support there, and obviously breaking down below there would be an extraordinarily negative turn of events. When you look at this chart, we have been somewhat sideways as of late, but when you also look at the last couple of months, it is a bit of a “W pattern”, so that is another thing that will attract a certain amount of technical trading. At this juncture, I think it favors the upside, but it is going to be extraordinarily noisy to say the least. Volatility is probably the only thing you can count on here, and I think that the market is one you have to be somewhat careful with, but I still favor the upside and breakouts that show that the momentum is building back up.
