French Stocks Encounter A Piece Of Resistance


France’s CAC-40 Index is testing its post-2015 Down trendline; a break above could bring another short-term pop.

When considering modern European equities, each country’s market essentially falls somewhere on the swine scale. We mean no offense, but outside of a nice jolt in early 2015, the continent’s stock markets have been dismal relative and absolute performers for many years. On one end, you have the PIIGS, several of which are not far off of multi-decade – or all-time – lows. On the other end, you have your run of the mill pigs, countries whose markets have been in a rut for decades, though they aren’t necessarily plumbing decade lows. Falling into this latter category of oinkers is France.

After topping out in 2000, the French CAC-40 Index has formed a series of long-term lower highs, first in 2007, then again last year. Presently, the index is 36% below its 2000 highs. Even more disappointing, particularly with other global equity indices hitting 52-week highs, is the fact that the CAC-40 is still 16% below its 2015 highs. So, again, no offense but we’re just calling a swine a swine.

Speaking of 2015, the index is presently testing a key point of resistance related to last year. Specifically, it is the Down trendline stemming from the August 2015 highs and connecting the late-2015 highs (on a log scale). This may pose a challenge for French stocks to overcome in the near-term.


If the CAC-40 is unable to surmount this downtrend, the year-to-date lows (around 3900) are not that far away. The problem is, those lows are also approximately in line with 3-year lows. And while a breakdown below that level may not be imminent, it certainly looks to be in the cards eventually given the index’s inability to sustain any distance above the level over the past few years. And a break of that level could be devastating.

That said, what if the CAC-40 is able to break above the post-2015 Down trendline? In that case, it could allow for a decent pop higher in the short-term. Specifically, we see a potential 6% of immediate upside before encountering significant resistance. That resistance would be plenty significant, though, as it is presently represented by the broken post-2011 Up trendline (currently approaching the 4750-ish area). Also in that vicinity is the key 61.8% Fibonacci Retracement of the 2015-2016 decline. Depending on the timing, these two pieces of resistance could converge as prices reach that vicinity, making for an especially difficult challenge.


First off, though, the perpetually-challenged French CAC-40 will have to deal with the Down trendline from the 2015 highs. As this level around 4480 may signify a less formidable challenge than that which awaits above at 4750, let’s call this present test A piece of resistance. If the index can surmount this area, a stauncher test may lie ahead around the 4750 level, You might call that level THE pièce de résistance.

That is the level that may eventually prove to be the Waterloo for French stocks.


Painting is the Battle of Waterloo by William Holmes Sullivan.

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The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.