The CAC 40 index is trading 0.71% lower, increasing the chances of the market entering a period of correction as it responds negatively to the latest US jobs report. As a result, any earlier gains in the CAC 40 index have been erased. However, the French stock market is still hanging on to some gains for the week. It is currently up 14.69 points, but its ability to hang on to these gains will depend on some late demand pressure to save the market’s weekly open at 6447.
The recent rally in the CAC 40 index that has seen the market gain 8,87% in July and 0.38% this August came on the heels of upbeat GDP readings for France. The French economy grew 0.5% quarterly in Q2 2022, according to data released in the last week of July by the National Statistics Institute INSEE. This reading exceeded market expectations by 3 percentage points, leading to the recent rally.
The technical outlook indicates that the CAC40 is approaching a major resistance that has held for four months. This could be an attractive position for those wanting to initiate shorts to catch a potential correction. However, these have to contend with the recently broken 200-EMA line.
A successful downgrade of this moving average, now acting as dynamic support, could lend credence to this countertrend positioning. However, this contrarian positioning could fail if the bulls defend the 200-EMA and breach the 4-month-old resistance.