The CAC 40 has surged higher this morning and is trading up 1.33% on the day. So far European shares have reacted positively to, German Industrial Production numbers (MoM) (APR) beating expectations at .8%. As well, traders are still reacting to commentary given yesterday by Federal Reserve Chair Janet Yellen. With the likelihood of a potential rate hike for June diminishing, equities markets may be poised to rally further.
CAC 40 Daily Chart
(Created using Marketscope 2.0 Charts)
Technically, the CAC 40 has continued to rally after finding support near 4,400. In order for this rally to continue however, prices must pass through several critical points of resistance. This includes a downward sloping trend line, which forms near 4,515. In the event of a breakout here, Junes standing high at 4,538 continues to act as the next major barrier for the Index. In the event that prices turn at trendline resistance, it suggests that prices may be trading in a consolidating triangle. This opens the CAC 40 up to decline back to values of support. This includes the previously mentioned support at 4,400, as well as triangle support near 4,300.
SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) has moved to an extreme, and is reading at +2.20. SSI is a contrarian indicator, and with 69% of open interest long, it suggests that prices may continue to trade lower. Alternatively, in the event of a bullish breakout, SSI would be expected to flip net negative as prices advance.
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