The CAC 40 Index fell slightly during the session on Wednesday, dropping below the €5000 level. This of course is a large, round, psychologically significant number, and as a result it will attract quite a bit of trading action. However, what I find interesting is that we bounce back above the €5000 level, even though the Euro was strengthening all day at the same time.
You can see on the chart that I have 3 lines drawn. I have an uptrend line that I believe is supportive of this market. I also have a horizontal line at the €4900 level that should be massively supportive. And then I also have the top of what I believe could be the channel that we are currently trading in. Because of this, I believe that Paris is at a major crossroads. But I also have to admit that this might be the best trading opportunity I see at the moment.
3 different possibilities
The reason I say this index is at a bit of a crossroads is that I see 3 scenarios at the moment. A break down below the uptrend line, I feel that we head down to the €4900 level next. If we end up ultimately slicing below the €4900 level, I think we fall much farther at that point. On the other hand, if we stay above the uptrend line, I believe we will continue to channel higher. At the moment, I believe that the CAC is a strong market but I need to wait and see how this market behaves today. I do think that the bulls are probably going to end up being in control ultimately, but it could be a bit of a rocky few sessions.
Out of all of the European indices, it is the CAC that I like the most. Ultimately, this market on a move higher should head to the €5200 level next, and then possibly the €5300 level. After that, it becomes more of a buy-and-hold type of situation. On the breakdown, we probably reach towards the €4600 level, and then €4400.
