CAC 40

Summary

Published 25th June 2018 & validated 13th August 2018

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.

Market Pulse

Published 13th August 2018

Showtime approaching for Europe! Major indices have been selling off all across Europe. France was no exception. Price action took the CAC 40 near the blue channel’s support. It appears like we have another up-down sequence before minute wave ii(circle) finishes. If our analysis is correct, we are a few days away before a rally starts, which extends the entire cycle a bit further to the upside.

The pale blue trend channel is likely to guide us whether we are correct with our analysis or not. A clear break of that trend should occur soon if the cycle ended in May 2018 already.
We are still favoring the black scenario slightly over the red. We expect to see another extension to the upside for French equities.

CAC 40 Technical Analysis Short Term

Published 26th July 2018 & amended 2nd August 2018 (chart only)

French equities will probably extend to the upside. The orange trend channel to the downside got violated during the past few trading days. Similar price action is happening on the Dax, Eurostoxx, and FTSE. The black scenario will probably play out eventually. However, the CAC Elliott wave structure may need a couple of small corrections before pushing strongly to the upside.

The main takeaway is that the pale blue trend channel must hold if we are correct about the black scenario. A penetration of the blue trend channel to the downside shifts odds towards the red scenario.

CAC 40 Technical Analysis Medium Term

Published 5th July 2018 amended 19th July 2018 (last paragraph)

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. 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.

Technical Analysis