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The Paris Stock Exchange CAC 40 Index closed on Monday 22nd September 2008 at 4223.51. The Major Head and Shoulders measurement formula (vertical green lines on chart) suggests a minimum price target of 2700, a drop of over 1500 points over the next several weeks, possibly months. The current downward thrust might even take a year or more to drop the 1500+ points to the 2700 level. This level is a minimum expectation. I will post updates to these major stock markets as time goes on.
Note the declining 30 week Simple Moving Average, and especially the 40 wk SMA. These Moving Averages indicate a market in brutal decline. Until these MAs start moving horizontally at the very least it would be folly to think that the French Bear is finished his big meal, which just might be your hard-earned!
All the signals on this chart are frightening and they ought to be worrying longs. As shorting has been suddenly banned and/or heavily regulated in the past few days around the world in a knee-jerk panic, short sports must be cursing. Looks like the markets will collapse anyway, without them.
On the way down to the expected minimum 2700 level and below, expect many bear market rallies. It is worthwhile to check out the 1929-1932 decline to see how it progressed in a down-up-down fashion for what must have seemed like an eternity to all those being wiped out.
It is fascinating and worthwhile to study the smaller, Minor Head and Shoulders pattern that formed upon the Major H&S Pattern in the chart displayed. Such structures reinforce the negative message being flashed to chartists. Note also how its measurement formula indicated a minimum target of 4250 - which was arrived at in early July, 2008.
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For those chartists interested in Elliott Wave Principle, I have indicated where I believe the corrective A-B-C waves are. Of course, as for the London FTSE 100 and many other major world markets, the potential end point of Wave C is way off the chart. By the way, if this A-B-C correction turns into a downward movement of 5 (not just 3) waves, it will be signalling much more than merely a severe Recession is in the offing. Elliott C waves are deadly.
Bon chance! Good luck to all with the CAC 40, or with any other market. Marshall McLuhan (1911–1980) was right. We live in a Global Village. C'est la vie!
James Leo Donoghue
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