Whenever I pivot from U.S. markets to European bourses, I’m constantly reminded of the much higher volatility that European equities markets appear to be faced with. A cursory look at Wall Street easily confirms the overall bullish trend that has dominated the scene for several years, and this holds true for the Nasdaq (QQQ) and the Dow Jones Industrial Average (DIA). That several minor market corrections ensued following disastrous financial reports from China is secondary to the fact that structurally the U.S. economy is sound. As we turn our attention to Europe, things are a little more opaque. For starters, the French CAC 40 index has taken investors and traders on a roller coaster ride since April 2015. A glance at the 1-year chart reveals the robust ascent that began in January 2015 and reached a peak in late April. But from there, it was a writhing ride of ups and downs that eventually plunged the CAC 40 to 7-month low in July 2015.

Based on the aforementioned sampling, it is clear that the CAC 40 has performed rather well, in the YTD percentage and the 1-year return percentage. To better understand this index and why its figures are more bullish than one might give it credit for, it is a good idea to take a look at companies that comprise it. The CAC 40 represents 40 of the most successful companies in France. The evaluation criteria include market capitalization and liquidity. The market’s base year was 1987 and the base level was 1,000.

Which Companies are the Heavyweights of the CAC 40?

While these figures fluctuate every couple of seconds, the biggest companies in the CAC 40 by volume include ArcelorMittal (MT) (10.95M), Alcatel Lucent (ALU) (4.24M), Orange (ORAN) (2.34M), AXA (1.91M), Total (TOT) (1.89M), Credit Agricole (CRARY) (1.68M), Peugeot (PEUGF) (1.54M), Engie (1.56M), Vivendi (VIVHY) (1.35M) and BNP Paribus (BNPQY) (881K). Research indicates that 37 of the 40 companies in the CAC 40 were in the red on August 31st, with just Safran, Alstrom and Pernod Ricard in the black. This is revealing, since it shows that the most recent performance of the top-performing stocks has largely been overshadowed by the year-to-date performance of these stocks, hence the 11.10% year-to-date return and the 9% 1-year return. The YTD performance of Accor is +13.23%, Alcatel Lucent +1.01%, Orange -1.27%, AXA +16.06%, Total -5.32%, Credit Agricole +11.90%, Peugeot+49.80%, Engie -18.01%, Vivendi +6.43%, BNP Paribus +14.15%. Based on the strong performance of the top performers in the CAC 40, there is fundamental strength in the index.

Should you go long or short on the CAC 40?

For binary options traders, the index is definitely trading on the up. This is evident from the trend that points to a strong recovery on Wall Street and consolidation on the LSE, DAX and other bourses. China is front and center in the global equities dilemma: however the Chinese government has now washed its hands of trying to stabilize the Shanghai Composite and the Shenzhen Composite by way of large-scale equities purchases. Instead, the Chinese authorities are going after rogue banks, investors and others it suspects of trying to undermine the Chinese stock market. This is perceived by China as offering more ‘free market movement’ to its stock market, but global traders and investors see it more as a witch hunt. The interrelatedness of global markets is something that cannot be discounted. The delay of a Fed interest rate hike has helped to assuage trader concerns and that has boosted equities on U.S. and European bourses. My advice: look favorably on the CAC 40.