CAC Forecast: Paris Gives Up Early Gains
- The Parisian CAC 40 has initially rallied during the training session on Monday, but has given back in the early gain.
- While we did end up forming a bit of a shooting star, it’s not necessarily something that I’m overly concerned about, as it looks more like consolidation at this point than anything else.
- In fact, you could almost make an argument that we are in the midst of forming some type of Polish flag, which of course a lot of traders will pay attention to.
The Trend
The trend has been higher for stock markets around the world for some time now, as it appears that people are waiting for central banks to cut rates yet again. The European Central Bank might even be cutting it soon as this summer, and if that’s going to be the case it could add a little bit of liquidity to the CAC, the DAX, the MIB, the AMX, etc. In general, I think European indices should do fairly well, at least initially. The question then becomes whether or not the ECB is cutting because of some type of emergency that it can get its arms around?
Technical Analysis
At this point, I’m very interested in the €7900 level as a potential support region. It’s probably also worth noting that the €8000 level sits just below current trading, so that probably comes into the picture as well. The 50-Day EMA is racing toward the current trading levels, so I think that is essentially going to be the “floor in the market” as things stand right now. I was an area we had broken out of as significant resistance, during the beginning of the year. Ultimately, this is a market that I continue to buy dips in, and I do think that it is probably only a matter of time before you rally again, but it does make sense to work off a little bit of upward momentum. Markets don’t go in one direction forever, so there’s no reason to think that the CAC would be any different at this point.
S&P 500 Forecast: Continues to Bounce Back and Forth
- The S&P 500 initially tried to rally during the course of the trading session on Monday, as the 5100 level underneath continues to be supported.
- The 50-Day EMA sits just below there, and it does make a certain amount of sense that we would continue to see interest in the market.
- On the other hand, the market rally and from here would open up the possibility of a move toward the 5200 level, as we continue to consolidate overall.
Earnings Season
Earnings season of course has kicked off, so I think a lot of this noise that we see will ultimately end up being the norm. All things being equal, I think it’s likely that the market will be very noisy, but ultimately, we are still very much in an uptrend. The earnings season causes quite a bit of noise, and therefore it’s likely that the market will continue to be difficult to hang onto, but the overriding fact is that we are most certainly in an uptrend, and that has not changed.
Even if we were to break down below the 50-Day EMA, the 5100 level itself is supported as well. Breaking through all that then puts the market in the mode of looking at the 5000 level to see whether or not we can see enough buyers in that region to keep the market supported. As long as we can say above the 5000 level, I think that there’s a real shot at this market continuing to go higher.
Regardless, I have no interest in shorting any of the US indices as everybody is hanging out and waiting for monetary easing to come out the Federal Reserve, something that should be the case during the later part of this year. Ultimately, it’s also worth noting that retail sales has still been strong, so even if we don’t get monetary policy easing, the reality is that Americans continue to spend. As long as that’s the case, it’s likely that we will try to revisit the 5300 level over the longer term. I have no interest in shorting US indices at the moment as the momentum has been so strong.
DAX Forecast: Strong with a Bounce
- The German Dax has shown the market to show upward pressure with the €18,000 level, an area that a lot of people will be looking at as and an area of interest.
- The 50 day EMA since underneath there and therefore I think it offers a certain amount of support if we can break above the highs of both Friday and Monday, then I think the Dax has a real shot at going to the 18,500 level.
- This is an area that we have seen selling in the past, but I think it is only a matter of time before we break through it overall.
At this point, the market is likely to continue to see a lot of volatility. And with that being said, I think you have to be very cautious with your position sizing. Nonetheless, if the Dax has shown itself to be resiliently bullish and the fact that we have pulled back just a bid offers enough value that I think people would get involved.
A Recent Small Drop Offers Opportunity
When you look at this drop of about 4%, it could very well end up being a buying opportunity. The 50 day EMA offers a significant amount of technical support as well, and as long as it looks like the ECB is going to be cutting rates, it’s very possible that you will have the Dax be the first place people throw money at.
I have no interest in shorting this market and even though we have had this a little bit of a pullback, we are still light years away from turning around and showing any proclivity to drop for a significant amount. So, with that being said, I think you have to keep in the back of your mind that this is a market that you have to be very patient with. You probably don’t want to have a huge position in, but you certainly should see this as a market that could rally over the next several weeks, if not months.
NASDAQ Forecast: Continues to See Buyers Overall
- The Nasdaq 100 has rallied a bit during the early hours on Monday, as perhaps there’s been a big sigh of relief that the Middle Eastern conflict hasn’t expanded.
- That being said, I think we are still very much in a consolidation area, and that is an area that I think a lot of people would pay close attention to.
- This market will continue to move on the handful of major stocks that everyone owns.
- Nonetheless, this market is in an uptrend, and people will continue to see buyers ahead. Remember though, this is earnings season, so volatility could be an issue overall.
We had so much in the way of a massive uptrend that working off some of that excess makes sense. Furthermore, we also have the idea that the earnings season is currently kicking off and that obviously has an influence on stocks. But regardless, the big driver, of course, is going to be the Federal Reserve and its monetary policy. Fed watching is by far the most important thing that traders can do at this point in time. Earnings may have an effect, but longer-term it is still about the interest rate situation.
This Market Has Support
At this point, it’s likely that we could see a situation where, any dip I think gets bought into the 17,775 level should continue to be support right along with the 50 day EMA. So as long as we can stay above all of that, I think we’re going to continue to see choppiness, but overall, more leaning towards the upside.
If we can break above the 18,500 level, then it opens up a much bigger move in the Nasdaq 100 and I think eventually will go looking to the 20,000 level. I’m not necessarily expecting that right away. but I certainly would not be surprised by it as the trend has been so strong up to this point. A breakdown below the 17,775 level could lead to a deeper correction, but, that won’t only end up being a buying opportunity down the road.
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Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 