CAC 40: Towards new releases fed

(News Bulletin 247) – An ample bearish gap opening is looming on the Paris market on Monday, a market whose barometer index, the CAC 40, lost 2.69% on Friday after a continuous mobilization session of the selling side, in the wake of the ECB’s announcements the day before, clearly suggesting entering a tight monetary turn. Over the past week as a whole, the CAC 40 lost 4.60%, penalized by industrials, defensive stocks, growth stocks and banks. It is this federation of sector and style that is of particular concern. Danone will have lost 5.81% over the week, LVMH 5.94%, Airbus 6.15%, Hermès 6.26%, STMicroelectronics 6.48%, Société Générale 6.53%, EssilorLuxottica 6.82%, Dassault Systèmes 6.84%, BNP-Paribas 7.53%, Publicis 4.06%, Crédit Agricole 7.86% and ArcelorMittal 4.72%.

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 (0.25 percentage point) increase in its interest rates in July, which will mark the first rate hike since May 2011, but also signaled that it could give a new tightening in September and if necessary even more strongly, a priori by 0.5 point (50 bps).

On Friday, it was the turn of US inflation to nervously focus the attention of operators, as an essential working basis for the Fed in the construction and management of its monetary trajectory. On the broadest product base (food and energy included), prices increased monthly by 1%, against 0.7% expected, and 0.3% in April… What further consolidate the he idea of ​​very firm monetary tightening, weighing on risky assets. At the end of May, inflation at an annualized rate (food and energy included) reached 8.6%. Excluding these volatile items from the base, the price increase reached 6%. Clearly, the “peak-inflation-already-behind-us” scenario is losing credibility… And the dread of the Fed – and investors – namely entering into a price-wage spiral n is not an option definitively ruled out.

Wall Street, penalized by the addition of its two events, saw its losses accelerate sharply on Friday. The Dow Jones lost 2.73% to 31,392 points and the tech-heavy Nasdaq Composite lost 3.52% to 11,340 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 2.91% to 3,900 points.

A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0480. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $118.50.

To follow as a priority on the statistical agenda this Monday, the unemployment rate in Italy at 10:00 a.m. The agenda will become much more dense tomorrow with, among other publications, the German ZEW index and industrial production in the Euro Zone.

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, were accompanied by a continuous mobilization of the selling camp 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.

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 6600.00 points.

Hourly data chart

Chart in daily data

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