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The CAC 40 index weakens a neckline around 7,250 points, based on a chartist figure itself included in a vast diamond (flattened diamond). The atmosphere remains weighed down by signs of weakness in the Euro Zone’s leading economy, Germany, the pressure put by Fitch on the American banking sector, and recent very disappointing Chinese statistics (industrial production, retail sales and the unemployment rate, published overnight from Monday to Tuesday all fell significantly short of expectations).
On Wednesday, the market dissected the few statistics of the day, with in particular industrial production in the United States for the month of July which increased by 1% over one month, thus exceeding expectations.
“With the resilience of industrial activity in Europe fading, with growth in China virtually at a standstill and domestic demand for consumer goods likely to weaken due to the further rise in interest rates, the groups American manufacturers are likely to experience difficulties in the second half of this year”, nevertheless judges Capital Economics.
Published yesterday, housing starts and monthly building permits came out very close to expectations. Operators took note at 8:00 p.m., well after the closing in Paris therefore, of the Minutes of the Fed, the traditional chronological report of the debates of the last Monetary Policy Committee in July. Minutes which reflect the idea of maintaining, for many more months, a high dollar rent. For the September FOMC, a status quo on rates is the scenario that is emerging, with an 86.5% probability according to the CME’s FedWatch tool.
On the values side, the movements remained contained on the CAC 40, Hermès signing the largest increase (+0.9%) while Publicis showed the largest drop (-2.15%). The oil company Maurel & Prom for its part recorded a good increase (+19.5%) after announcing the acquisition of Assala, a group operating in Gabon, a transaction which will allow the French company to significantly increase the size of its production.
On the other side of the Atlantic, the main equity indices ended Wednesday’s session in the red, in different proportions, like the Dow Jones (-0.52% to 34,765 points) and the Nasdaq Composite (-1.15% to 13,474 points). The S&P 500, the reference barometer of risk appetite in the eyes of fund managers, fell 0.76% to 4,404 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 $1.0870. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $80.50.
On the agenda this Thursday, to follow in priority the Philly Fed manufacturing index and the weekly registrations for unemployment benefits at 2:30 p.m.
KEY GRAPHIC ELEMENTS
The exit from the congestion figure on Friday July 21 was thwarted twice, on July 26, on a wide gap, and over the whole of the past week, on a break in the short moving average. The bullish message has momentarily lost its meaning.
We will monitor any formation (and confirmation at the end of the session) of a bearish gap. We witnessed the perfect repeat of the August 2nd candle on Tuesday at the close, ie a school doji with elongated shadows, a marker of nervous indecision at the heart of an enlarged pattern of consolidation.
On Thursday August 10, the tricolor index came up against the upper limit of a larger diamond, the validity of which was effectively tested on Friday, and fully validated by the bearish engulfing candle combination at the start of week 33. high volatility is expected until the end of August, a month that does not historically deviate from a volatility trend.
At this stage, a neck line around 7,250 points is threatened.
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 7500.00 points.
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