Index Slams into 200-Day EMA

I will be cautious about putting too much money to work right away.

The Parisian CAC Index rallied on Monday to reach the €6600 level. This is an area that featured the 200-day EMA and previous structural resistance. We pulled back from there, as equities gave back some of their early gains in general. It was not just in Paris, we also saw the same thing in Amsterdam and Germany. Because of this, it’s likely that we will see a bit of a pullback into the previous consolidation.

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Underneath, the €6400 level is an area where I would expect to see some support, but between here and there we have the 50-day EMA as well. Because of this, the market is more likely than not going to be very noisy and choppy, so if you are a short-term trader, the CAC might be a great place to be over the next several days. Eventually, we will have to make a breakout in one direction or the other, leading to a couple of different possibilities.

If we break down below the €6400 level, it opens up a possible move down to the €6300 level, followed by the €6100 level. On the other hand, if we break to the upside, then it’s possible we could go looking to reach the €6800 level, where we have seen a lot of pushback over the last several months. A lot of this is going to come down to risk appetite, and it should be noted that the CAC is full of luxury goods, meaning that it is especially sensitive to risk appetite.

Typically, when we are stuck between the 200-day EMA in the 50-day EMA, you see a lot of choppy volatility before making a bigger move in one direction or the other. I believe that’s what we are getting ready to witness here, so I will be cautious about putting too much money to work right away, but I will be paying attention to those levels that I mentioned previously, as it could give me a bit of a “heads up” as to where the market may go next. Obviously, there are a lot of macroeconomic problems right now, and therefore the occasional announcement or statement could cause problems as well. Because of this, you need to be very cautious about your position size as a sudden move could take you out.