CAC 40: Bye bye TINA!

(News Bulletin 247) – It is in a heavy atmosphere that the markets will approach this Thursday what will constitute THE macroeconomic publication of the day, namely the consumer price index across the Atlantic. Excluding food and energy, volatile elements, monthly price increases are expected at +0.4%. Any upward overshoot of this consensus would inevitably cause a rise in government bond yields, and shake up pre-opening data on Wall Street, the day after the publication of Minutes (minutes of the last FOMC) which brought neither relief nor hope of a pause in the process of raising federal rates. Not surprisingly, these Minutes clearly hinted that the members of the Fed were in agreement on the need for major new tightening of the screw to fight against chronic high inflation, even if it meant weighing heavily on economic activity.

“Returns on 10-year benchmarks hit 4% for the first time since mid-2010. This is well above their fair value, which we estimate at 3.2% and which takes into account more than $1.5 trillion in quantitative tightening from the Fed, our long-term inflation outlook and weakening near-term growth momentum,” Pictet WM strategists said.

On the statistics side on Wednesday, operators took note of the producer price index, up 0.4% for the widest basket of products, slipping beyond expectations.

LVMH ended up 1.87% at 621.9 euros after the announcement of its third quarter sales. The luxury giant, which kicked off the results season in Paris, published sales close to 20 billion euros in the third quarter and remains “confident in the continuation of growth” despite the economic and geopolitical context. In its wake, Christian Dior gained 2%, Hermès 1.8% while Kering closed close to balance at 445.45 euros. Conversely, Vicat plunged 9.3% at the close as the cement maker warned that it would not be able to meet its profitability targets in the face of rising energy costs.

On the other side of the Atlantic, the main equity indices ended symbolically in the red, like the Dow Jones (-0.10% to 29,210 points) or the Nasdaq Composite (-0.09% at 10,417 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, contracted slightly by 0.33% to 3,577 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 $0.9700. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $87.20.

To follow as a priority on the statistical agenda this Thursday, the producer price index in the United States at 2:30 p.m. Oil stocks will be revealed at 5:00 p.m.

KEY GRAPHIC ELEMENTS

The protest reaction that began on September 30 has emptied its reservoir of energy, the harami of October 05 having been confirmed by a closing on Friday on the opening level of October 04.

We mentioned Monday a “danger”, at this stage, that of the opening under the gap of October 04, graphically isolating four sessions, subject to preservation of the gap at the close on Monday. However, the index came during the session to fully fill its opening gap. No remainder of the October 4 gap is visible. These elements militate for a continuation, in decreasing volatility, of a decline towards 5,640 points, after which a short reaction is possible.

In the immediate term, the moving average at 20 hours (in dark blue in hourly view) exerts a strong pressure. It is therefore a continuous slide that currently prevails. The mantra TINA (There is No Alternative) is definitely buried.

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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