CAC40: wake up time?
Originally posted on stock market daily.fr
In this weekly update, Gilles Leclerc offers you an inventory of the situation and the follow-up of a technical signal which could well be the harbinger of a resumption of the short-term trend.
We’ve been bored on the CAC40 for more than a month and a half now, that is to say since it succeeded in breaking free from its “historic” resistance of 7,400 pts.
In the meantime, we were treated to a few small bullish surges quickly countered by timid bearish attacks – which were also immediately defused. All to allow the CAC to keep its head above water, and to continue to maintain its waterline above the 7,400 pts zone. Nothing convincing, not really dynamic to exploit for the moment. For the past month, the CAC has varied by less than 1%.
But be careful not to fall asleep.
The Parisian index could soon wake up and validate a new (and expected) trend recovery signal.
The trigger ? A priori, in the days to come we can expect growing nervousness as long as the question of the American debt ceiling is not resolved. But that is an unpredictable factor. Whether the US will be foolish enough to continue to allow a gigantic and growing deficit. Or, conversely, foolish enough to risk default. (It’s up to you to see which would be the best option.)
In short, in this weekly update, I therefore propose not only an update of the state of play on the CAC40 – but above all to start following a technical signal which could well be the harbinger of a resumption of the short-term trend.
Until this signal is validated and we know more about the fate of the negotiations between Democrats and Republicans, I would carefully avoid playing with fire, while continuing on the other hand to carry the bullish positions, since the underlying trend remains bullish (we’ll talk about that in a moment).
A signal ? What signal?
I summarize in a few words what the signal in question consists of.
But first, here’s what to do to see more clearly:
select two time units. For example here the weekly time unit and the daily time unit;
add (preferably) a trend indicator like a MACD.
I summarize the general idea.
For an impulse move to have a chance to develop, both MACDs need to be pointing in the same direction: they need to be in sync, being either both up or both down .
If for example the MACD in weekly view is bearish but bullish in daily view, then it is very unlikely that the market will manage to catch wind in the sails (in other words to develop a trend).
It’s simple, logical, easy to follow and understand. The two trends (weekly and daily) counter each other. Result ? We are not advancing.
Regarding the CAC40, on the weekly view, the MACD is (slightly) bearish…
…while on the daily view, it has just turned upwards.
As long as we remain in this configuration, do not expect big differences with regard to the CAC40.
Here is a probably more telling example that targets the latest signals.
Rising phase: the two MACDs synchronize on the rise (orange arrows). We can clearly see on the daily view the impetus that followed…
And when does the movement reverse? When both MACDs swing lower (yellow arrows).
In short, this strategy is not necessarily a panacea because the configuration and limits of the volatility envelopes must also be taken into account. (I won’t go into more detail because to explain everything I would need an hour of webinar…)
But in any case it allows you to know if a priori you are positioning yourself in the right direction or in the wrong direction.
In short, as long as the two MACDs are not “in sync”… it is better to do like the CAC: delay.
By the way, did you notice that the decline that followed the last bearish synchronization (the yellow arrows) is significantly less violent than the previous wave of rises?
Normal ! (Or at least logical.)
Because as I told you in the introduction, the underlying trend is bullish.
And it will remain so as long as the support of the channel (in green dots) is not broken.
It is currently moving towards 7,250 pts.
Reason why I keep the bullish positions for the moment.
Have a good week,