The CAC 40 Closes at Monthly Lows

Talking Points

• The CAC 40 Fails to Close Higher on ECB Rate Decision
• Key Rates were lowered to 0%
• SSI Reads Neutral at -1.14

CAC 40 Daily Chart

(Created using Marketscope 2.0 Charts)

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The CAC 40 has failed to close higher today, after initially rallying on this morning’s ECB rate decision. Key rates were lowered to 0% from .05% as well as cutting its back deposit rate to -.4%. This surprise stimulus caused CAC 40 Prices to rally and traded as high as 4,582 for the session. However, the Index soon reversed from its highs and is trading down 1.7%. Leading today’s declines is Airbus, which is currently trading 3.96% lower on the day.

With this morning’s turn in price, it suggest that the CAC 40 may now be turning back in the direction of its long term downtrend. This downtrend has been marked with a series of lower lows and lower highs, beginning with the November 2015 high at 5,005. Today’s decline also includes a technical bearish breakout below an ascending trendline. This trendline was acting as a value of support but with today’s move, it opens up the CAC 40 to again challenge the current 2016 low at 3,890.

Bulls looking for a turn in price will look for the CAC 40 to remain supported above 4,154. This area marks a 61.8% retracement in price from Februarys low to today’s high. In the event of a future bounce in price, it may suggest that the Index is putting in a new higher low. In this scenario, it would suggest that the CAC 40 may again attempt to break higher over 4,582.

It should be mentioned that SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) is currently reading at +1.43. While this number is not extreme, it should be mentioned that SSI has flipped from a negative reading in Tuesday’s article. If sentiment continues to read higher, it may suggest further declines in price for the CAC 40.

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By: Walker England, Forex Trading Instructor