The CAC 40 Index rallied significantly on Tuesday as we continue to see the Parisian index go much higher. Ultimately, this is a market that continues to see buyers every time we drop, so I think that will continue to be the case going forward. You should pay attention to the €7000 level, which is a large, round, psychologically significant figure. The market is sitting on top of that level from the recent pullback, so it is likely that we will continue to respect that area.
Keep in mind that European indices are rallying mainly due to the fact that the European Central Bank is so loose, so it makes sense that the Parisian index will behave as such. I think any time this market pulls back, there will be plenty of value hunters willing to get involved. It in fact, the €7000 level being broken to the downside is what it would take for me to get bearish, so I think that it would only be a buying opportunity near the 50-day EMA. The €6800 level is where we find the 50-day EMA, and it is likely we will see a bit of a bounce even if we do break down towards that area.
This is a market that should continue to go much higher, and I believe that eventually we will go looking towards the €7250 level, and then perhaps even the €7500 level. The markets continue to show plenty of bullish pressure, so obviously I do not necessarily want to short this market, but if I did get bearish, I might be convinced to start buying puts more than anything else. Another tailwind for this market is the fact that the euro is being eviscerated at the moment, so it does make sense that we would see stocks continue to offer a place for people to put money to work, as bond yields in Europe continue to drop as well. With this being the case, it is very likely we will continue to see more of a “buy on the dips” attitude over the next several weeks. Regardless, I will not be a seller anytime soon.
