The CAC 40 Index went back and forth on Tuesday to show a little bit of hesitation at these extreme highs. When you look at the recent run higher, it does make sense that we would go a little bit sideways in order to digest some of the gains, because the CAC has gone straight up in the air, much like most other indices that I follow. Sooner or later, you have to take a bit of a breather, and it is worth paying close attention to the fact that gravity has been ignored. If we take a look closer look at the chart, you will notice that we are just above the psychologically important €7000 level. This is a large, round, psychologically important figure, and one that will attract a lot of headlines. Nonetheless, I think that if we do break down below that level, it is not necessarily a cause for concern.
If we do break down below that level, then I think it just offers a little bit of an opportunity to pick up a bit of value. The €6750 level is an area that I think would offer a lot of support, and I would also point out that the 50-day EMA is sitting in that general vicinity. With that being said, I think it is only a matter of time before we find value.
On the other hand, if we were to break above the top of the candlestick for the trading session on Tuesday, then it allows the market to kick off its next leg higher. Typically, when you see a market go parabolic like this one has, you either see sideways consolidation, or a pullback in order to offer a bit of value. After this type of move, I have no interest in trying to short this market, and part of what may make you more money in Paris is waiting for value that you can take advantage of. The reopening trade will continue to see a lot of momentum in this market, and I think you have to like owning the CAC whenever you get a chance. In fact, it is not until we break down below the €6500 level that I would start to think about shorting.
