(News Bulletin 247) – Stunned by the prospect of even stronger monetary tightening than expected, to fight against a chronic price slippage, against a backdrop of legitimate fears about global GDP, the Paris market recorded a sixth session in a row in the red (-1.20% Tuesday at 5,950 points), breaking the highly symbolic threshold of 6,000 points. Pay attention to the possibility of the formation of a combination of candles in three crows (see below).
After the ECB last week, it’s the Fed’s turn to bring together its “Board”. Fed which will have to react to the latest inflation figures (+8.6% at an annual rate), published on Friday. Inflation that remains “stubbornly” high, according to César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management. “With tighter financial conditions already impacting the mortgage market and with consumer confidence plummeting, the Fed is certainly aware of the risk of tipping the United States into recession. small steps or accelerating its tightening under pressure from political authorities calling for a vigorous fight against inflation, the situation is delicate overall for the various assets, which justifies a cautious and defensive approach to portfolio management.
Verdict at 8:00 p.m. for the monetary policy decision itself and 8:30 p.m. for the press conference which will be very well attended.
“The Fed Chairman needs to maintain an aggressive rhetoric, especially after last week’s inflation numbers. He should reaffirm that the Fed’s number one priority is to slow inflation, and that it will act in accordingly, and more vigorously if necessary”, summarize the analysts of La Française.
As a reminder on Thursday, the European Central Bank completed a key meeting of its Board of Governors. If the powerful Frankfurt Monetary Institution has so far not touched the cost of money itself, it has ratified the end of its program to buy back assets on the markets. The institution’s president explicitly announced a 25 basis point increase in interest rates in July, which will mark the first rate hike since May 2011, but also signaled that she could give another round in September. of screws and if necessary even more strongly, a priori of 0.5 point (50 pdb).
In terms of statistics on Tuesday, the even lower than expected score of the ZEW index of confidence in the German economy weighs. The index of the same name came out at -28.0 this month. “The economy remains exposed to many risks, such as the effects of the sanctions against Russia, the unclear pandemic situation in China and the gradual change of course in monetary policy. So, although expectations have improved, they are still in negative territory,” commented ZEW President Professor Achim Wambach. RAS on the other hand on the side of the dynamics of producer prices which have not moved away from the target.
On the values ​​side, Atos suffered a new dip, sinking by more than 23% while the Ministry of Economy and Finance said it was carefully monitoring the future of the group considered as a “strategic asset” (a qualifier rarely synonymous with stock market success in the mouth of the ministry) while the ESN (digital services company) confirms that it is considering a form of dismantling. Worldline lost 7.3% in its wake, while Atos has just reclassified a block of around seven million shares, representing 2.5% of the capital. Air France-KLM was also particularly struggling, selling more than 13% after completing its latest capital increase to date.
Across the Atlantic, major equity indices charted a fresh red candle for a mixed close on Tuesday, with the Dow Jones losing 0.50% to 30,364 points, and the Nasdaq Composite managing to nibble 0 .18% at 10,828 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.38% to 3,735 points.
To follow as a priority on the statistical agenda this Wednesday, across the Atlantic, retail sales at 2:30 p.m., the manufacturing index Empire State at 2:30 p.m., NAHB Residential Property Market Index at 4:00 p.m., Crude Inventories at 4:00 p.m. The monetary appointments to tick are naturally the outcome of the FOMC at 8:00 p.m. and the Fed press conference at 8:30 p.m. Also to follow is a speech by Mrs C Lagarde at 4:20 p.m. at the London School of Economics.
KEY GRAPHIC ELEMENTS
The sell signals have multiplied since the combination of “evening star” candles (May 27, 30 and 31). The openings successively in bearish gap of the last two sessions of the week, then of the first session of the following week, were accompanied by a continuous mobilization of the selling side during the session and closing on the low points of the session. All in sharply rising volumes. The momentum of participation will have followed that of the clearings, even as the CAC will have re-entered the lower part at a bearish slant that retains its resistance attributes. The picture is dark. And it would become more in case of validation of a combination tonight in three crows. The last two had resulted in powerful releases (February 16, 17 and 18, 2022, then March 9, 10 and 11, 2020), then in the midst of a stock market panic at the start of the pandemic, between two major gaps…
FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.
This bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 6000.00 points.
Hourly data chart
Chart in daily data
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