The CAC40 has been a model for  doing what is expected of it, and was somewhere in the middle of the lot, above the AEX (Amsterdam) but below the DAX (Frankfurt). We had it in one of our comments first in March 13th of this year (it can be retrieved under CAC40). Here is that chart;

For color I added some silly comments re Edith Piaff, but the main message then was that this index was going to go down, based ,of course , on the EW patterns. Here is today’s comparable chart;

I have tried to duplicate the annotations from the old chart onto today’s , keeping the angle more or less the same. Of course the lower chart shifts about 4 months to the left. They can be aligned perfectly by clicking on them and then moving them around. Anyway, so far we have retraced almost 70% of the post March rally. Also we are on pace to do it at practically the same angle, that is at the same speed as in 2008. Obviously this index is oversold as can be seen from the RSI and MACD. A bounce around here or a little lower should perhaps be anticipated, but this drop cannot be complete. There are at least two 1-2 s at the top of this decline, if not three. Also the last 800 points are straight down, not the usual way for these drops to end. We should get to the bottom of this, perhaps in as little as two or three months!

One can always count on the French to add a little elegance to a situation. This is the CAC forty and as European stock exchanges go, it is somewhere in the middle of the lot, well above Amsterdam but well below Frankfurt. Here is the chart;

This is almost as nice as listening to Edith Piaff sing “Non, je ne regrette rien”. Except, that with the benefit of hindsight, I certainly do regret getting the timing wrong on this retracement, not just the CAC but all of them. Notice that the drop into the lows of March took about a year. Given that it was reasonable to expect a retracement that would last about half as long or , at the worst, equally long (this is normal for counter-trends). Instead it took exactly twice as long, mostly courtesy the US Fed with QE2. But despite this meddling EW still seems to apply very gracefully, with the notable exception of the, somewhat awkward ,“megaphone” in the middle . Note that the recent high is a near perfect 62%. Note that C=B=A as vectors and that C travels about 61% as far as A. In addition both the RSI and MACD are dropping for quite some time.

   Still life has not been all that rosy for either bulls or bears. After the first 6/7 months of retracement this market, as of today, is pretty well where it was 17 months ago giving new meaning to the old adage timing is everything. Now might just be the right time to try the short side again.