December's break above 3575 had opened the door to a further rise in the index to 4040, where a 50% rise from the important low in September 2011 would be fulfilled. This 4040 target has recently been reached, with the CAC creating a high of 4072 last week. The recommendation now reverts back to neutral.
The final push to 4040 also completed a very neat 12.5% rise from the minor low established in April. Although the tailwinds of other rising global indices may take the CAC higher, it remains largely an index to avoid for now. Not only is there resistance at my completed target of 4040, but a cluster of percentage resistance around the G2 level at 4180 will make any forward progress difficult. Only a clean break above 4180 would provide the next lower-risk buying opportunity.
The French CAC has been one of the less impressive stock markets since the major lows were established globally in March 2009. To date, the index has been unable to break above the resistance line drawn following a 66.66% rise from that low. Furthermore, if stock markets did fall sharply again in the future, I expect the CAC will also lead the way down.
Recommendation: Neutral. Sell short on any further rise to 4180.