The CAC 40 index has pulled back in the past few days as some investors start taking profits after a successful year-to-date rally. It retreated to a low of €7,300, which was a few points below this month’s high of €7,395.
ECB tightening done
The CAC 40 index has been in a bullish trend this year, making it one of the top-performing indices globally. It has jumped by ~12% this year, meaning that it has outperformed its key American counterparts like the Dow Jones and the Nasdaq 100.
The index has jumped because of the overall view that the European economy was doing better than expected. Early this year, the consensus was that the bloc would see one of its worst recessions in years because of the rising natural gas prices.
However, the region has done better than expected considering that natural gas and LNG has been a bit weaker than expected. Data compiled by S&P shows that natural gas price has dropped to the lowest point since 2021.
The CAC 40 index has done well even amid protests in the country. These protests are about the country’s pension situation. Emmanuel Macron ignored parliament and decided to increase the retirement age from 62 to 64.
French stocks ignored these protests because of the global nature of the companies in the index. Most of them like LVMH and Kering make most of their money abroad.
Meanwhile, four ECB officials have pointed that the bank will end tightening soon. The four officials are Francois Villeroy, Yannis Stournaras, Gediminas, and Boris Vujcic. In a note, Yanis said:
“Especially after the latest events I feel now that we are close to the end. I can’t say we’re at the end, that it’s over, but we’re definitely close to the end.”
Luxury brands have been the best-performing stocks in the CAC 40 index this year. Hermes, L’Oreal, LVMH, and Kering stocks have jumped by over 30% this year. Other top performers are companies like STMicroelectronics, Orange, Stellantis, and Danone.
CAC 40 index forecast
CAC 40 chart by TradingView
The daily chart shows that the CAC 40 index is at a crossroads considering that it has formed a double-top pattern at €7,394. The neckline of this pattern is at €6,794, the lowest level on March 20. In price action analysis, this pattern is usually a bearish sign. The index remains above the 50-day and 100-day moving averages.
Therefore, further gains will only happen if the index moves above the key resistance at €7,394. If that happens, the index will next rally to the next psychological level of €7,500.
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