CAC 40


Published 25th June 2018 & validated 12th July

The CAC 40 is most likely within a final swing into a cyclical top. The main question is whether the swing finished in May 2018 or extends further to the upside. We expect the subsequent correction to last multiple months to a couple of years.

CAC 40 Technical Analysis Short Term

Published 12th July 2018 

There is a time to go long, there is a time to go short, and there is a time to go on vacation. Right now it’s time to go on vacation regarding European equity indices.

The French CAC 40 index continues its price action in a complex manner. Our technical chart below remains perfectly valid. French equities could either swing into a final cyclical high or their cyclical high has been reached already.

We have to be patient in order to get more hints about the exact CAC 40 Elliott wave pattern short-term. Fear of missing out must not stand in the way. A resolution to the upside will be most likely confirmed by another major European equity index. It will break important trend channels or important resistance levels. That kind of action will most likely provide some form of a more attractive risk/reward entry opportunity than we get right now. Similarly, a resolution to the downside post a cyclical top will most likely result into a recognizable motive wave. More important, the subsequent three-wave retracement is likely to be a sizable second wave. That may provide a good entry opportunity for short speculative position for traders.

All in all, we are neutral on the CAC 40 as well as on the other major European indices right now. We prefer to stay on the sidelines and wait for better risk/reward opportunities.

We have published a broad overview of European equity indices on SeekingAlpha. It gives our big picture of what we expect for the major European indices during the next years.

Published 25th June 2018 & updated 5th July (chart only)

The CAC40 Elliott wave structure may extend into the 6k region. However, the CAC 40 has to complete the current correction to the downside very soon for that. Moreover, the pale blue trend should not get broken convincingly if an extension is going to happen. A break of the 5415 level before we see further downside increases odds for an extension. That would leave a 3-wave correction to the downside on the charts. Such action with complement confirmation of another major European index further increases odds for the black scenario.

Alternatively, the CAC Elliott wave structure shows a valid terminal count of multiple degrees as we publish this. It is depicted in red. The alternative scenario would fetch higher odds if selloff continues and morphs into a motive wave that breaks the trend channel. This scenario means that the CAC40 just reached a cyclical top.

Both scenarios are equally likely at this point. We are neutral on the CAC 40 and remain patient for signs of confirmation. 

CAC 40 Technical Analysis Medium Term

Published 5th July 2018

The CAC 40 technical analysis reveals that the index currently trades around a 17y old trend line. A similar situation can be seen at the IBEX and Eurostoxx 50 indices. However, the IBEX has a lagging wave structure and currently trades below the long-term channel support/resistance.

Over a longer period, the CAC 40 traced out a triangle, just like a few other European indices, as well. The triangle either completed in 2016 or needs another down-up sequence as labeled in the chart below. We will most likely get further hints regarding that at the next cyclical correction. An incomplete triangle should start with a strong motive wave to the downside. A complete triangle of cycle degree will most likely show shallow behavior. The contraction bounds (red lines) will most likely not get violated significantly if the triangle completed 2016 already.

The key takeaway is that we do not have to get married to either scenario right now as their initial path will be most likely the same. Moreover, the next cyclical correction will most likely provide us with further hints about the longer-dated continuation as it unfolds. 

Technical Analysis