CAC 40: Circumspection…

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Circumspect, investors are unable to unite this week, the relief caused by the continued decline in crude oil prices being able to be interpreted as the other side of the same coin, namely the slowdown in economic activity in the main economic centers of the planet. Certainly this is the stated aim of the monetary policies carried out by the Fed and the ECB for almost three years, but the adage “bad news is good news” has limits. Example this morning with the publication overnight of confirmation of deflation in China, which the markets cannot naturally rejoice in…

Investors are also in a waiting position before the long-awaited speech by Jerome Powell, the chairman of the American Federal Reserve, on Thursday during a debate at the International Monetary Fund. Especially since the head of the Fed left investors hungry by dodging the question of terminal rates yesterday, during the opening speech of the Centennial Conference of the Division of Research and Statistics, in Washington DC.

But several Fed officials and in particular supporters of a strict monetary policy came to instil doubt. Minneapolis Fed President Neel Kashkari said it was premature to declare victory too quickly in the Fed’s battle against inflation. He was followed by another Fed official, Michelle Bowman, who judged that a further rate hike could be necessary to control inflation, if it did not slow down in the coming months.

On the values ​​side, Crédit Agricole closed up 1.1% after quarterly accounts better than expectations. On the other hand, Legrand disappointed the market (-1.3%), with lower quarterly growth due to a sharply declining building market.

On the other side of the Atlantic, the main equity indices closed on Wednesday at levels very close to equilibrium, in the absence of any response from Powell on the question of the rate peak: -0.12% to 34,112 points for the Dow Jones, +0.08% to 13,650 points for the Nasdaq Composite and +0.10% to 4,382 points for the S&P500, the reference barometer of appetite for risk in the eyes of fund managers.

An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0700. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $75.70.

On the agenda this Thursday, to follow as a priority the weekly registrations for unemployment benefits in the United States at 2:30 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.

After the formation of a congestion figure near 6,800, the past week will have been the scene of a significant technical reaction, orchestrated and amplified by the values ​​which had initially been the most mistreated. This energy, exhausted early, should give way to a rapid filling of the gap of November 2, just below the key threshold of 7,000 points.

FORECAST

Considering the key graphical 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 below resistance at 7200.00 points.

Hourly graph

Daily Data Chart