CAC 40: Mr Powell does not want to (cannot) declare victory too quickly

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In good spirits yesterday in the absence of a sharp macroeconomic benchmark, the Parisian market took the CAC 40 above 7,100 points (-1.13% to 7,113 points), with support in particular from luxury and tech. LVMH gained 1.55%, Dassault Systèmes 1.59% and Wordline 5.65%. The prize went to Schneider Electric, undisputed leader of the flagship index yesterday, up 8.26% at the close, at 141.26 euros. The low and medium voltage electrical equipment manufacturer, which organized an investor day in London, revealed medium-term objectives that were higher than market expectations.

To be complete on the values ​​side, excluding the star index, Orpea has soared by 43.7%, the operator will be able to begin its restructuring while the courts have authorized its takeover by the CDC without going through a public offer of purchase. Solutions 30 rebounded by 14.3%. The quarterly activity of the Luxembourg company specializing in technical services for new technologies was once again driven by the excellent dynamics in the Benelux.

These good market conditions should be called into question this Friday, after the remarks made yesterday by J Powell, the head of the Fed, during a round table entitled “Monetary challenges in a global economy” during the annual conference of research Jacques Polak, in Washington DC. The powerful financier took part in the game of questions and answers and was unable to avoid the question of so-called “terminal” rates, namely whether or not a peak has already been reached on the Fed Funds. Mr Powell clarified that the members of the Institution were not convinced that the Fed Funds were high enough to fight inflation. Enough to cause a new surge on the American 10-year bond, close to 4.62%.

In the statistical chapter on Thursday, weekly registrations for unemployment benefits were scrutinized. They came out perfectly in line with expectations, with a low level of 217,000 new units.

On the other side of the Atlantic, the bullish streak on equity indices has come to an end. The Dow Jones lost 0.65% to 33,891, with the dampening effect of its bank-rich composition. The Nasdaq Composite, densely represented in technological growth stocks, mechanically suffered more (-0.94% to 13,521 points). The S&P500, a broad index, played the average, losing 0.81% to 4,347 points.

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 $1.0660. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $76.00.

On the agenda this Friday, priority will be given to a speech by Ms. Lagarde, President of the ECB at 1:30 p.m. and the American consumer confidence index (U-Mich, preliminary data) at 4:00 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.

Beware of the possible formation on this last session of the week of a bearish harami candle combination, which would break the momentum.

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