CAC 40: Fed Funds finally at the top of the stairs?

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The CAC 40 continued its protest rebound movement towards the symbolic threshold of 7,000 points on Wednesday (+0.68% to 6,932 points), with the support, in particular, of reassuring statistics on the state tensions on American employment. Note that volumes were particularly timid yesterday, due to the holiday nature of the day (All Saints’ Day) and therefore the absence of a notable fringe of speakers.

The survey by the private human resources firm ADP highlighted 113,000 job creations in the private sector. A figure well below expectations, and which should be welcomed with relief by the Fed. Indeed, any indication of easing of tensions on employment is good to take for those who claim to be able to bring inflation back to a target of 2%… Verdict tomorrow with the NFP (Non Farm Payrolls) report, federal report for private employment (excluding agriculture) for the month of October.

To complete the macroeconomic picture, dense on Wednesday across the Atlantic, the ISM manufacturing index stood at 46.7 in October, down compared to the previous month (49), while economists expected stability in this indicator. Job openings in September increased slightly, to 9.55 million units compared to 9.497 million the previous month.

Two hours after the Paris close, the markets took note of the status quo, with no surprises on Fed Funds, whose remuneration remains between 5.25% and 5.50%. If stakeholders do not formally exclude, far from it, a final revaluation of key rates, the probability of this option has greatly diminished, within the meaning of the CME’s FedWatch tool.

On the value side, Danone gained 1.8% supported by Morgan Stanley which raised its advice on the value to “overweight”, judging that the group’s recovery is starting to bear fruit. Valeo for its part gained 3.05% while Goldman Sachs went from “sell” to “neutral” on the value. The big variation of the day is however to be credited to the biotech Cellectis which took 191.8% (yes 191.8% you read correctly) after having entered into an agreement with the British AstraZeneca which includes an initial payment of 25 million of dollars, additional milestone payments that will be contingent on certain conditions, an initial equity investment of $80 million and a further potential capital investment of $140 million.

On the other side of the Atlantic, the reduction in tensions on the monetary cord will have particularly benefited, legitimately, the Nasdaq Composite (+1.64%) while the Dow Jones gained 0.67%. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.05%.

An update on other risky asset classes: around 8 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0600. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $81.00.

On the agenda this Thursday, to follow as a priority the final manufacturing PMI data in Europe this morning (summary data for the Euro Zone at 10:00 a.m.) and the weekly registrations for unemployment benefits across the Atlantic at 1:30 p.m.

KEY GRAPHIC ELEMENTS

The technical situation on the CAC 40 is quite readable: the index came out of a flattened diamond (diamond) pattern on September 25, which pushed the market into the red. Two pullbacks later, it was the turn of the symbolic threshold of 7,000 points to suffer the threat of prices, a threat put into effect on October 18, 19 and 20 in increasing trading volumes. Since then, a figure of congestion has emerged, under a 20-day moving average (in dark blue) which melts below 7,000 points.

The preferred scenario in the very short term is that of a graphical rejection validated up to the symbolic 7,000 points before selling pressure resumes.

FORECAST

Considering the key graphical factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.

This bullish scenario is valid as long as the CAC 40 index is trading above support at 6796.00 points.

Hourly graph

Daily Data Chart