CAC 40: The gap of February 22, a credible rallying point

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Small blow for our national CAC, which after having valiantly filled Friday’s bearish gap on Monday, lost ground on Tuesday (-0.86% to 8,049 points), in a gloomy atmosphere, particularly in the airline sector / defense, weighed down by the hope of a truce in the Middle East. Safran lost 2.12%, Airbus 3.44% and Thalès 4.89%.

Unsurprisingly, investors limited risk-taking at the dawn of the two major meetings of the week, namely the publication of inflation figures in the United States this Wednesday, as well as the meeting of the European Central Bank, Thursday.

US retail prices are expected to increase by 3.4% year-on-year, for the broadest basket of products. Meet at 2:30 p.m. to read these CPIs, the statistical highlight of the week.

Operators continue to digest the latest report on American private employment, NFP report published Friday. If average hourly wages, at +0.3%, did not move away from the target, job creations in the private sector excluding agriculture amounted to more than 300,000, exploding the target to 212,000 (275,000 creations in February). Finally, the unemployment rate, expected to be stable at 3.9%, fell to 3.8% of the active population.

“This report on employment has given food for thought to the most hawkish members of the FOMC who see it as an opportunity to maintain a restrictive monetary policy for longer,” analyzes Thomas Giudici, head of bond management at Auris Gestion . “The talk by Neel Kashkari, President of the Minneapolis Fed, of ‘forgoing any rate cuts this year’ if necessary was understandably not well received by the market. Inflation data to be released on Wednesday will therefore be crucial in trying to see more clearly the timetable for lowering the Fed’s key rates.”

As for the probabilities of a reduction in federal rates from the June deadline, they continue to decline, at around 50%, according to the CME Group’s FedWatch tool. “The market now only anticipates two rate cuts this year…compared to more than 6 rate cuts in December,” notes Alexandre Baradez (IG France).

On this side of the Atlantic, it is the Council of Governors of the European Central Bank which is focusing attention. It will end on Thursday.

“As the ECB has positioned its key rates at a very restrictive level, we expect a growing consensus within the Governing Council in favor of a first cut in June, as the inflation rate has fallen below 3%. “, anticipates Patrick Barbe, head of investment grade bond investing in Europe at Neuberger Berman. “Beyond June, the ECB will reiterate that the pace of easing will depend on the moderation of wage increases, which appears to be in sight based on leading indicators for 2024.”

On the other side of the Atlantic, the main equity indices ended Tuesday’s session at levels close to equilibrium, against a backdrop of wait-and-see behavior like the Dow Jones (-0.02%) or of the Nasdaq Composite (+0.32%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 0.14%.

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 $1.0850. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $84.80.

On the agenda this Wednesday, pay attention to the consumer price indices in the United States at 2:30 p.m. and the Fed Minutes at 8:00 p.m.

KEY GRAPHIC ELEMENTS

Thanks to the crossing volumes, the bullish extension since Tuesday and the sectoral federation, we can shift the 8,000 psychological points into support, against which in the long term, a pullback (confirmation graphic rejection) is not excluded.

Now is the time to take a breather from the lessons. The CAC index has traced, in contact with the upper Bollinger band, two candles where the low points, the opening level and the closing level merge. And this before starting a slow decline towards the lower part of an ascending channel (in black) on the daily chart.

The session of Tuesday April 2, by the volumes, the length of the red body of the corresponding candle, reinforced the 8,220 points as a difficult level to cross.

Note that below 8,000 there is a gap (February 22), the power of attraction of which could be tested.

In the immediate future, the index had the strength to completely fill, and very quickly, Friday’s bearish gap, a quotation gap which no longer appears like a scar.

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 8220.00 points.

Hourly graph

Daily Data Chart