(News Bulletin 247) – Despite Apple’s very good quarterly publication, the last session of a particularly difficult week should see the red dominate, against a backdrop of persistent concerns that the monetary shift will tighten more than expected.
Admittedly, at the end of the last FOMC, the Chairman of the Fed did not give any clear indications concerning the timetable for raising federal rates, but adopted a tone that leaves no doubt about his determination to be firm, in particular given the dynamics of prices and tensions on the labor market. In the end, a scenario, which seemed “extreme” even a few weeks ago, of five Fed Funds hikes over the year, with a “double blow” why not as early as March, does not is not totally excluded from the universe of possibilities.
For Ronan Blanc, manager-analyst at Financière Arbevel, Jerome Powell is clearly on the offensive. “After having locked himself in a transitional inflation scenario for too long”, the boss of the monetary institution “is trying to regain control, without letting himself be influenced by ambient noise (geopolitics, omicron impact, drop in equity markets )”.
The monetary adjustment cycle will be faster than in previous episodes because the underlying economic fundamentals are also more robust”, continues Ronan Blanc. And if the reduction of the balance sheet is underway, “purchases will not disappear for all that and thus prevent the yield curve from becoming too flat (and leading investors to anticipate the worst-case scenario: a recession)”.
“The Fed is probably paying for its 2021 stubbornness on inflation. We would have liked to gain more monetary visibility, but we will have to wait a little longer for the signals of disinflation to be more apparent. It is probably a matter of weeks. In the meantime, the relay is given to companies whose publication of results should be a factor of stability for the markets”, advances the manager. Apple
It is in this context that operators are welcoming the PCE (Personal Consuption Expenditure) prices, the Fed’s favorite barometer for taking the temperature of prices, even before the CPIs. According to the Bureau of Economic Analysis, on a basis excluding energy and food (the most volatile elements of the basket), prices rose in December at a monthly rate of 0.5%, in line with expectations.
To follow the consumer confidence index (U-Mich) in revised data for December at 4:00 p.m.
KEY GRAPHIC ELEMENTS
Let’s stop for a moment on the combination of candles validated on Thursday, firmly campaigning for a continuation of the ebb: a so-called three-cord black structure. The three black ravens are sometimes called “three-winged raven”, a term that comes from a Japanese expression saying that “bad news has wings”. This combination portends prices to fall if they appear at market highs or during an uptrend. Visually, the 3 crows are 3 black candlesticks, combining the following 2 characteristics:
1) All 3 candlesticks close at or near their lows.
2) Each open must be inside the body of the previous candle.
The structure is therefore fully validated and the thick and constant volumes on the three candles highlight its direction, in a market worried about the rise in long-term government bond yields.
In the end, over the whole of the past week, and on sustained cumulative volumes, the index will have closed on its session lows four times. In weekly data, this is the third time that it has closed on (or almost on) its weekly lows.
The oblique line symbolizing the underlying trend was broken, and after a pullback on January 12, the index started falling again on January 13, with investors mobilizing throughout the session. Since then, the index has almost returned to levels where it had drawn a W on the slant last May. Breaking these levels would be problematic.
PREVISION
Considering the key chart factors we have mentioned, our opinion is negative on the Nasdaq Composite index in the short term.
This bearish scenario is valid as long as the Nasdaq Composite index is trading below the resistance at 13950.00 points.
CHART IN DAILY DATA
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Source: Tradingsat
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