We've been in an uptrend for so long that I think it is probably best to simply look for buying opportunities and looking at the recent consolidation as a simple pause in the longer-term move.
The CAC in Paris has rallied after gapping higher on Thursday to slam into a significant resistance barrier at the 6700 level. This is an area that has been significant resistance previously, and therefore it is not a huge surprise to see that we are stopping in this general vicinity. If we can break above the 6700 level, then it is likely that we could go looking towards the 6800 level, possibly even the 7000 level. After all, the CAC has been ripping to the upside over the last couple of days, and it certainly looks as if we continue to see momentum heading into this market to the upside.
The 50 day EMA was skipped above during the open on Thursday, which of course in and of itself is a bullish sign. If we get a pullback from here, I think it is only a matter of time before we find support of action that we can start buying. After all, this is a market that has made a huge move to the upside over the last couple of days and has been in an uptrend for the longer term. The 6400 level underneath seems to be a bit of a “floor the market”, especially as the 200 day EMA is starting to reach in that same general direction.
Another thing that you may need to pay close attention to is the fact that the Euro has lost quite a bit of strength, and therefore it looks as if we could continue to look at this as a potential move based upon the fact that exports coming out of France should continue to be cheaper a lot of luxury brand buyers. Luxury goods drive the bulk of the CAC, with perhaps the major exception being Airbus. With that being the case, I think we continue to see export pressure to the upside, which means that we will continue to see this market to the upside.
If we did turn around a break down below the 6400 level, then I think that the CAC could probably be shorted, but even then, I would be a bit cautious. We've been in an uptrend for so long that I think it is probably best to simply look for buying opportunities and looking at the recent consolidation as a simple pause in the longer-term move.