The CAC 40 rallied again on Tuesday to reach all-time highs. At this point, we have formed a huge basing pattern and now it looks like the double bottom is going to kick off a pretty big move. The end of the year could be a bit choppy and noisy, but really at the end of the day this tells me that the CAC is more than likely going to kick off the next year as well. I believe the very first target will be the 7200 level.
Pullbacks at this point in time should continue to attract plenty of attention, as it seems like the buyers have made it plain that they are ready to come in and pick this market up anytime it drifts lower. The 50 day EMA is all the way down at the 6226 level, and is rising. I do not think we will break down below there, but if we did, then the 6800 level I think then becomes the “floor in the market.”
The next couple of sessions will be a little bit noisy, but I suspect that when traders come back after New Year’s Day, they will be more than willing to throw a lot of money into this market in order to pick up risk in a market that I think clearly looks as if it is ready to continue going higher. I think this is true not only in the CAC, but in several other risk-related assets that I follow right now. The fact that we are closing at the very top of the candlestick for the trading session on Tuesday is a good sign, but really at this point I would not read too much into it. I would only put little bits and pieces to work, and then only add as the trade works out in my favor. Keep in mind that is going to be very noisy here over the last couple of days, so you do not want to get too aggressive. Lack of liquidity can cause major headaches, and the last thing you want to do is finish the year with a poorly executed type of trade. I buy on dips, I have no interest whatsoever in trying to short this market even if you were to tell me that we are going to fall for the next three days in a row.
