The Parisian CAC Index rallied significantly to break above the €7000 handle, an area that will attract a certain amount of psychological tension. Nonetheless, the market looks very bullish, and it is difficult to imagine a scenario where I would be a seller of this market. That does not mean that we cannot pull back, and I even expect to see that rather soon.
Looking at this chart, it is much like a lot of the other indices around the world, as we have far too much in the way of overt exuberance, so we probably need to see a bit of pullback in order to see value that people are willing to jump into. Remember, the CAC tends to be very sensitive to the overall risk appetite globally, as it is full of luxury brands. Nonetheless, I think that the €6800 level should offer significant support, as it had been previous resistance before. Ultimately, this is a market that I think continues to see a lot of “buy on the dips” trading, so I am looking for that pullback in order to have the ability to get involved.
The 50-day EMA is also reaching towards the €6800 level, an area that I think will continue to be important due to the fact that it had been so resistive previously. You can see I have a line on the chart showing that area, and it is obvious that the breakout above that level was where this move started. That being said, I do believe that it is only a matter of time before we get a certain amount of buying interest.
If we were to break down below the €6700 level, then I think it could be rather destructive for this market, but I just do not see that happening. In fact, I believe that the longer-term outlook for this market is rather strong, and it is very likely that we will go looking towards the €7500 level. I do not think we will get there quickly, but I do think we will get there perhaps by the end of the year. Ultimately, I believe that the market is simply one that you cannot chase at this level, as it had gotten here too quickly. Just wait and be patient; you should get an opportunity to get long in the next few sessions.
