The CAC 40 Index pulled back ever so slightly on Wednesday, only to find buyers to push it back above the 6700 level. The 6700 level is an area that is a large, round, psychologically significant figure, so there is probably a certain amount of interest due to that. Nonetheless, we are closing at the top of the range, which typically means that we are more likely than not to continue going higher.
Pullbacks at this point should continue to see plenty of support underneath, especially near the 50-day EMA, which sits just above the psychologically important €6600 level. The market also has taken a look at the rest of the world, as they are all rallying. Paris will not be immune to this bullish fever, and I think it will continue to go much higher. The 50-day EMA curling higher also suggests that momentum is going to continue to be a major factor, so I think it is only a matter of time before we kick off what could be classified as a small bullish flag.
If we do break out above to the upside, it is likely that we go looking towards the highs again based upon the “measured move” of this flag. The market should continue to go much higher, and at this point every time we get a dip, I suspect that there will be plenty of buyers. I have no interest in shorting, but if we were to break down below the 6400 level, then it is possible that we could see a bit of a breakdown, but we are so far removed from that right now that it is very likely going to take some type of catastrophic event to make that happen. We are much more likely to see the 7000 handle then dropping down there, but it is something that you need to keep in the back of your mind in case something changes. European indices are getting a little bit of a boost due to the fact that some of the economic figures are starting to turn in the right direction, but we obviously have a lot of work to do as we have seen plenty of concerns pop up in the news from time to time.
