As many readers are aware, we have a regular feature on Twitter and StockTwits each week called “#TrendlineWednesday”, featuring some of the most noteworthy current trendline developments in the financial markets. As we mentioned on Twitter the other day, there are some weeks when it takes considerable effort to find even a handful of trendline developments meeting the “noteworthy” criteria. Other weeks, there are so many noteworthy trendlines in play that several big ones can’t even make the cut. The latter situation would describe this week. And among the abundance of interesting examples is perhaps the most prolific trendline in all of the financial markets currently being tested: a long-term Down trendline on France’s CAC-40 stock index.
The trendline at hand stems from the CAC 40?s all-time high in 2000 and connects (on a linear scale) the peaks in 2007 and 2015. Back in April, at the time of the presidential elections in France, the CAC-40 found itself again testing the 17-year Down trendline. Following the elections, the CAC-40 finally hurdled the long-term trendline – and in dramatic fashion, gapping up by more than 4%.
After brief follow-through into early May, the CAC-40 began a long, steady descent back toward the breakout level of the trendline. As markets and securities tend to do, eventually, the CAC-40 filled the April 24 gap a couple weeks ago. All that was really left was to test the broken trendline, presently intersecting near the 4995 level. On Tuesday, amid the North Korea-inspired market jitters, the CAC-40 finally did test the trendline again, making a low of 4995.07 before immediately bouncing.
Presently, the CAC-40 is trading at 5135, up nearly 3% in a straight line off of its trendline test. For those who still think this type of analysis is some kind of voodoo, the odds of a random precise reaction off of a 17-year trendline like this would be astronomical. We’re happy to have them continue to think these kinds of events are random and that markets are efficient and all that stuff. That’s what gives the rest of us an edge.
So what’s next for the CAC-40? Naturally, as long as the trendline, i.e., former resistance, continues to act as support, expect the CAC-40 to continue its bounce.
The iShares MSCI France (NYSE:EWQ) closed at $29.80 on Friday, up $0.10 (+0.34%). Year-to-date, EWQ has gained 22.86%, versus a 11.90% rise in the benchmark S&P 500 index during the same period.
EWQ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #15 of 86 ETFs in the European Equities ETFs category.