The CAC gapped lower to kick off the trading session on Tuesday as we continue to see a lot of panic. That being said, the market is likely to continue seeing buyers on these dips, especially as the 6632 level has held. This is an area that has been important in the past, and it is worth noting that we have sold off quite drastically, but at this point in time we are still technically in an uptrend.
The CAC is highly levered to luxury, so you need to keep in mind risk appetite. That being said, if risk appetite does return, the CAC will be one of the first places in Europe where money goes flowing towards. On the other hand, if we were to break down below the €6600 level, then we are going to chip away at the €6500 level which I considered to be the “bottom of the uptrend.” In other words, I think you may have a significant buying opportunity getting ready to present itself, but we have not been able to stabilize enough yet.
It is worth noting that the market gapped lower and then turned around to fill that gap. This is why I believe that a break above the high of the trading session on Tuesday would be such an important move because it would show a return to bullish behavior. At that point, it is very likely that we would see the market try to go higher to fill the gap near the €7000 level. That has yet to be filled, so it does make sense that we would eventually go looking towards that region.
On the other hand, if we were to break down below that €6500 level, I think at that point in time the CAC will collapse, perhaps dropping yet another 10%. That being said though, the market is probably going to be very volatile, but as long as the reopening trade is still something that people are willing to bet on, the CAC will do fairly well. Yes, it has been very messy over the last couple of days, but at this point it is still non-trending volatility. I am paying very close attention to the highs of the day on Tuesday, because it could give me a buying opportunity.
