The CAC 40 index, which serves as a benchmark for the French stock market, experienced a volatile trading session following the recent US elections. Initially, the index saw a surge in response to the election results, but this optimism quickly faded as concerns about potential trade tensions between Europe and the United States took center stage.
Export-oriented companies such as L'Oréal, Pernod Ricard, and Air Liquide were particularly affected, leading to a decline in their stock prices. As the day progressed, the market's initial enthusiasm gave way to a more cautious outlook. The geopolitical landscape raised questions about the implications of a Trump administration on international trade, contributing to a decline in the CAC 40 and reflecting a broader trend of investor caution across European markets.
The energy sector also faced challenges, with fluctuating oil prices and an increase in the US 10-year yield further complicating the trading environment. The bond market reacted to the election results, with the US 10-year yield jumping 16 basis points, reflecting changing investor sentiment and expectations regarding future economic conditions.
From a technical perspective, the CAC 40's performance has been characterized by bearish trends, particularly when trading below the 200-session moving average and the resistance level at 7735 points. However, the index has been testing a crucial support zone around 7340 points, which has emerged as a focal point for potential buy strategies. This support level is significant, as it aligns with the early-September low and a long-term bullish trend line established since the market's lows in March 2020.
The current risk/return trade-off appears to favor buying at this support threshold. If the index rebounds from this level, traders will closely monitor the resistance at 7735 points. A successful breach of this resistance could signal a bullish reversal, potentially propelling the CAC 40 towards its yearly high of 8250 points. The entry point for traders is set above 7340 points, with a target of 7700 points and a stop-loss positioned at 7250 points, indicating a favorable risk/reward ratio exceeding 2.
Investor sentiment remains cautious as the market digests the implications of the recent political shifts. The initial optimism surrounding the election results has been tempered by concerns over trade relations and the potential impact on European companies. As the CAC 40 tests critical support levels, market participants are keenly aware of the need for a rebound to restore confidence in the index's upward trajectory.
The focus will be on how the new administration's policies will unfold and their potential effects on global trade dynamics. With the CAC 40 at a pivotal juncture, traders are poised to react to any signs of recovery or further decline. The interplay between political developments and market performance will be closely monitored, as investors seek to navigate the complexities of the current economic environment.