Monday, 7 May 2012

Hollande et Le CAC40 ! ( & S&P/EurUsd)

Shortly after I moved to France with my family in 2005 Sarkozy was elected to be the 8th president of the 5th French Republic. I will never forget that at that time there was great optimism and excitement about the prospect of change, opportunity , wealth creation and for the stripping away of punitive taxes and red tape.The feeling in the country was palpable and I clearly remember the next morning being spoken of as a new dawn... Sarkozy was to be the Margaret Thatcher of France, dragging her forward and into the the age of prosperity. But things change very slowly in France and it beyond the remit of this blog to list the endless disappointments and failures of Sarkozy's tenure in office even with the crunch/crash of 2007/8. A lost opportunity is an understatement. Last nights vote was as much of an anti- Sarkozy vote as a pro Hollande vote. But then austerity is never an appetising fiscal option to sell and Sarkozy had already had his golden chance and blew it and his policies in review were devisive and misjudged/ill timed/ lacklustre and most of all not ambitious enough.
 I cannot tell what will happen in the future but I suspect this election and the other European elections this May may be part two of the final act of the current hit drama called the Euro Zone (as we currently know it). The forces that bind the EU together are no longer greater than those forces that divide it.

What implications will last nights elections ( and lets not forget Greece)  have on European economy and the markets? This morning we seen important 'gaps' down on the charts. Here is the chart i showed a few weeks ago when i noted that price was not going to touch the centre lines ( see arrow on chart) of forks D-E-C and A-B-C and the reaction lines shown in dashed red from both these forks that 'caught' price and carried it higher where it failed to make a HH at the same time the S&P ( M12) was poking around and just above the 1400 level..There is no doubt in my mind that there is now an extremely high probability of price reaching the CL's of these forks. But first...How will the gap situation play out? I suspect we may see the gap closed today or tomorrow ( note the European market holidays. UK today/EU tomorrow) but i expect that fundamentals will drive this market very fast over the coming days and weeks. For myself , I will watch to see if we have a classic retouch on the underside of the RL this would be at the important psychological level of 3100.on the CAC (M12) and we now have two low time frame forks to seek a short entry/trade off (should the conditions arise). There is also an reaction line at 3095.50 around which i will observe price.

Moving on....What does this all mean for the US$/USDX and the €$ pair?? The DX has just had its first push above 80.00. I think we have recently made a new low pivot at an important confluence point of both ML's and RL's... More to come

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