The French DAX Index initially fell on Monday but found buyers underneath at the €6280 level. The market continues to find buyers, and it looks as if it is going to try to get to the 50-day EMA. The market is sitting just below the €6500 level and drifting lower. In fact, you could also make a bit of an argument for the 50-day EMA offering a downtrend line, that you could use as dynamic selling pressure.
Keep in mind that the CAC is essentially a luxury index, so it needs more risk appetite out there to push the market to the upside. The Parisian index has been sold off quite viciously, and at this point, a bit of a relief rally would make quite a bit of sense. However, that does not necessarily mean that we are going to be seen this market rally easily, and it certainly could set up a potential selling opportunity as well. The €6500 level would make sense as an area where there will be a bit of a built-in barrier, and any signs of exhaustion will almost certainly get jumped upon. On the other hand, if we break down below the bottom of the candlestick for the trading session on Monday, that would open up a fresh round of selling as well. At that point, I would anticipate that the market could drop down to the €6000 level.
Any breakdown below the €6000 level would open up a lot of selling pressure to send this market down to the €5800 level. In general, this is a marketplace that I think will continue to be noisy, so keep in mind that you need to keep your position size reasonable as the volatility is going to be all over the place, not only here but in just about anything else that is traded in the markets right now. As long as we continue to see a lot of concerns globally, this is a market that will be tenuous at best. I think this is more likely than not going to be a short-term rally that can get sold into. Ultimately, this market that looks likely to be a shorting opportunity given enough time, but one has to watch momentum as it is crucial.
