It will be a case-by-case basis, but overall it should bring down the index if we do in fact see growth get hit.

The French markets rallied initially on Tuesday to reach the €6000 level, but the CAC could not hold on to the gain. This was seen across the board, as initially risk appetite returned on Tuesday, but was given back rather quickly. It’s interesting that this happened, as we have just formed a “double bottom” just below. If that bottom gets broken, that could open up massive selling in the CAC, as well as be a sign that even more trouble is on its way for stock markets in general. The European Union of course will be very sensitive to the CAC as it is the second-largest market.

On the upside, the €6100 level did offer a bit of resistance, but if we were to break above the top of the candle from Tuesday, that would extensively turn it into an inverted hammer, which can be a bullish sign. At that point, I would anticipate that the CAC would try to get to the €6200 level, perhaps even as high as the 50-day EMA. That being said, it is difficult to imagine a scenario in which European stocks suddenly take off, because there have been comments here and there from the ECB about possibly tightening, and even if that weren’t the case, there are a lot of concerns when it comes to growth and energy.

On a break down below the double bottom, I think we have a real shot at going down to the €5500 level over the longer term. The stock markets in general around the world look very miserable at the moment, so I just don’t see how this will change. Given enough time, three likely that we see them all move in the same direction, and that is going to be lower. There are concerns about recession around the world, and France is no different.

Keep in mind that the French index has a lot of exposure to luxury goods, so it needs people out there willing to spend on luxury goods. In a recessionary environment, those are normally the first things to get thrown out, although it should be noted that the ultra-wealthy do tend to survive quite well. It will be a case-by-case basis, but overall it should bring down the index if we do in fact see growth get hit.

The market will continue to see a lot of pressure, but I think that the occasional rally will scare a lot of short-sellers.

The French index had tried to rally a bit in the futures market earlier on Thursday but then sold off quite drastically as we have seen negativity in stock markets around the world. We are now significantly below the €6000 level, breaking down to the €5800 level by the end of the session. I think it’s only a matter of time before we break down below, but right now it’s probably only a matter of time before we get some type of relief rally. That relief rally is something that I would not trust because quite frankly there’s no reason to buy equities anywhere right now.

The narrative around stocks is far too negative to think that now is the time to pick up value, despite what talking heads will tell you. The reality is that there is a lot of fear out there, and it’s only going to get worse. The market will continue to see a lot of pressure, but I think that the occasional rally will scare a lot of short-sellers. However, breaking down below the €5700 level opens up the possibility of a move down to the €5500 level.

The ECB is not quite ready to announce its completely dovish intentions, but a few cracks in the ice have appeared. If that happens, it may help stocks, but eventually we will start to talk about whether or not the economy is growing or not. The French economy is suffering right along with the rest of other major ones, so it’s not a huge surprise to see the CAC fall right along with everything else. Ultimately, rallies at this point cannot be trusted for a bigger move until we get above the 6400 level. If we break above there, then we could turn around completely. However, this is a market that shows a lot of uncertainty, and therefore fear should continue to run where we go next. The selling off of the CAC is going to coincide with everything that we see around the world, including the DAX which leads the rest of the European Union. The one thing that I would say is to make sure that you keep your position size relatively reasonable, as the volatility will continue to cause headaches for those trading this market going forward. The Euro has strengthened over the last couple of days, but it’s probably only a matter of time before we see the euro fall as well.