The Parisian index gapped lower to open up the trading session on Thursday, but then turned around to fill the gap and then turned back around. That being said, the market is looking a little overdone and exhausted, but at this point time I think that any pullback will more than likely offer value that a lot of people will be paying close attention to. This market has been extraordinarily bullish for quite some time, and therefore it makes quite a bit of sense that we need occasional pullback to offer value so more traders will get involved. France has been one of the better performers for a while now, so this should not be a huge surprise.
The €7200 level is offering a significant amount of psychological support, so it will be interesting to see if it holds. If it does not, then it is very possible that this market might drop another €200, reaching down towards the 50 day EMA which is sitting at the €7000 level anyway. Ultimately, the 50 day EMA is starting to curl higher, and it does show dynamic support. We been in an uptrend for quite some time, so this pullback will more than likely attract plenty of value hunters.
Keep in mind that France is highly driven by luxury goods, and Airbus. Quite frankly, this is an index it tends to do well when there are strong animal spirits, but also tends to underperform the DAX when we worry about economic concern. While the European Union is drowning just a bit, the reality is that stocks in general have been strengthening. The European Central Bank continues to be very loose with its monetary policy, and that of course will continue to elevate stocks in general. I like the Federal Reserve; the ECB is nowhere near tightening so it will be interesting to see if we get some type of major divergence between this index and some of the ones in New York. Either way, I think we continue to go higher and go looking towards the €7500 level above, which is the next psychologically important area, despite the fact that €7400 did offer a little bit of resistance. We had recently broken above the top of a “W pattern”, so that suggests that we have further to go as well.
