CAC 40: Contrarian trades will pay off

by

(News Bulletin 247) – Opening slightly lower in sight this Monday for the CAC 40, which should catch its breath after the powerful advance on Friday, largely achieved during the session, against a backdrop of hope for a complete reopening of the Chinese economy, thanks to an easing of restrictive measures linked to the Zero Covid policy.

According to Bloomberg, Chinese authorities are considering abolishing a system that prohibits airlines from taking certain routes to China, depending on the number of Covid-19 positive passengers they carry.

The CAC 40 gained 2.77% to 6,416 points, in sharply rising volumes, supported by luxury records and raw materials. LVMH gained 5.75% to 666.20 euros, Arcelor Mittal 6.48% to 23.51 euros, L’Oréal 6.78% to 321.40 euros, Kering 7.07% to 503.4 euros. Excluding the flagship index, Eramet jumped 10% to 75.80 euros. JCDecaux ended sharply up 14.3% after posting third-quarter activity well above analyst consensus.

However, the main statistical meeting of the day confirmed persistent tensions on the US employment front, suggesting a firm attitude from the Fed for the month to come. Attitude already confirmed earlier in the week at the end of the FOMC. Only the slight increase in the unemployment rate, to 3.7% of the labor force, can be seen as a sign of the effectiveness of the Fed’s monetary tightening measures. For the other main indicators, the average hourly wage rose more than expected, at +0.4% monthly, and the number of job creations in the private sector (excluding agriculture) exceeded 260,000, beyond expectations as well.

As a reminder on Wednesday, the Fed Funds saw their rent rise by 75 basis points, to 4.00%, as widely expected. What weighed on the other hand was the clearly displayed desire to postpone the idea of ​​a pause in the monetary tightening process (an option deemed too “premature”) as well as the clear warning on the prospects for achieving neutral rate. The objective of precise quantification of the latter is still delicate. In any case, it exceeded 5% after this monetary deadline.

On the other side of the Atlantic, the main equity indices ended Friday’s session in the green, like the Dow Jones (+1.26% to 32,403 points) or the Nasdaq Composite (+1 .28% at 10,475 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.36% to 3,770 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 $0.9775. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $88.60.

To follow as a priority on the statistical agenda this Monday, a speech by Mrs. Lagarde, President of the ECB, at 9:45 a.m., and the Sentix index of investor confidence in the Euro Zone at 10:30 a.m.

KEY GRAPHIC ELEMENTS

After a gap of shortness of breath (01/11), the barometer traced on Tuesday November 1st a doji with a very pronounced high shadow, uninviting. The confirmation was clear on Wednesday with a bearish engulfing combination in slightly higher volumes, then Thursday with a bearish gap. But the opening in reverse island Friday and the gains made during the session itself, only confirmed the nervousness and contrarian nature of the short-term market. Friday’s session is therefore not predictive.

FORECAST

In view of the key graphic factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that a crossing of 6550.00 points would revive the tension in the purchase. While a break of 6142.00 points would relaunch the selling pressure.

Hourly data chart

Chart in daily data

CAC 40: Contrarian trades will pay off (©ProRealTime.com)

©2022 News Bulletin 247

You May Also Like

Recommended for you