CAC 40: A contained reflux

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Very solid, the CAC 40 managed to remain in green territory at the close on Wednesday (+0.12% to 7,583 points). The boost, however, came from the sharp decline in inflation in the United Kingdom. The price increase stood at 3.9% year-on-year in November, compared to 4.6% in October. This good figure has accelerated the downward trend in bond yields, with in particular the rate of Germany’s 10-year debt falling below 2% for the first time since last March.

Operators were also surprised by the stronger than expected increase in the household confidence index across the Atlantic (Conference Board consumer index), which stood at 110.7, up almost 10 points.

Operators will now be able to look towards tomorrow’s publication of the PCE index, the Fed’s preferred measure in its assessment of inflation. Enough to further fuel his monetary thinking. As a reminder, last week, “Father Powell” came through the chimney with a rather accommodating package, at least considering its packaging. THE dot plots, in any case have suggested on the part of the Fed a 75 bps reduction in Fed Funds over the year 2024, while the lock was until then irremediably blocked. A clear signal has been sent to the market.

On the value side, the decline in bond rates benefited junk stocks, such as Maisons du Monde (+6%), Atos (+3.5%) and Fnac Darty (+3.5%). Virbac continues its progress and gained an additional 4% following the raising of the veterinary laboratory’s objectives for the year 2023.

On the other side of the Atlantic, the main equity indices experienced a session of decline on Wednesday, like the Dow Jones (-1.27% to 37,082 points). and the Nasdaq Composite (-1.50% to 14,777 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.47% to 4,698 points.

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 $1.0940. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $74.20.

On the agenda this Thursday, to follow as a priority across the Atlantic, the final Q3 GDP data and weekly registrations for unemployment benefits at 2:30 p.m.

KEY GRAPHIC ELEMENTS

The creation of new zeniths on the CAC, the high point of the autumn rally, will have crowned a remarkable federation movement. The first signs of the need for breathing have nevertheless appeared since Thursday, precisely since these new records were set. Negative CT opinion proposed due to the divergence observed between price and RSI in hourly view. The first bearish target is the positioning of the 20-day moving average (in dark blue), currently around 7,430 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 7585.00 points.

Hourly graph

Daily Data Chart