CAC40 Forecast: Continues to Consolidate

• The CAC 40 fell a little bit during the trading session on Wednesday, but he continues to pay close attention to the €7850 level.
• This is an area that has been rather important over the last couple of days and has been important multiple times in the past.
• Because of this, think a certain amount of “market memory” will come back into the marketplace, and I think a lot of traders will be watching this very closely.

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Not only is the €7850 level important, but we also now have the 50 Day EMA breaking above the 200 Day EMA, forming the so-called “golden cross”, something that a lot of longer-term traders will pay close attention to. Ultimately, this is a market that I think continues to be “buy on the dip”, but it is heavily influenced by other indices around the world, and it is probably worth noting that the CAC has been a little bit of a laggard compared to other indices until recently.

The question of course is going to be whether or not this is just simply a matter of the CAC “catching up”, or if it’s a situation where traders will be a bit surprised by a sudden negativity. Keep in mind that the ECB has a meeting on Thursday, and that obviously would play a part in how this behaves, as looser monetary policy is something that typically helps equities, especially as the idea now is about cheap exports, and with that being the case, traders will probably do the same thing that they always have done.

The size of the move to the upside quite often will warrant some type of pullback, so that might be part of what we are seeing, but it’s also worth noting that the market could be watching for a bit of consolidation in order to build up the momentum to the upside. In fact, we could very well end up forming a bullish flag, but either way I think we are a little overdone, at least in the short term. If we do break to the upside, the €8000 level will be the first barrier to overcome.

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