CAC 40: Putin recognizes the independence of the pro-Russian East Ukrainian territories, the market is stressed

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(News Bulletin 247) – The rise of a notch in geopolitical tensions between NATO and Russia in the Ukrainian crisis will have caused an acceleration of profit taking in Paris, in the absence of American benchmarks, Wall Street having not opened its doors for the President’s Day holiday. While the possibility of a summit between Biden and Putin having been quickly showered by the latter, who deemed the option “premature”, the Kremlin is now close to the Rubicon: it recognizes, by openly supporting the separatists in Dombass, the independence of two regions of this eastern part of Ukraine, which constitutes an additional step in the escalation, and further materializes the entry into a new Cold War with the West. The CAC 40 lost 2.04% to 6,788 points, further damaging the graphic threshold of 6,760 points, ready to give way under the onslaught of sellers. The opening of Wall Street on Tuesday for its first session of the week will set the tone for the days to come.

In terms of statistics, in the absence of American benchmarks, operators have turned to barometer indicators of activity in the Euro Zone. (PMI by IHS Markit) for services and industry. While the figures are rather close to expectations for industry, the score for services (55.8) is well above expectations. Chris Williamson, Chief Business Economist at IHS Markit, commented on the latest figures from the Flash PMI survey: for many consumer services – including travel, tourism and leisure – and helped ease supply challenges.With businesses anticipating a broader reopening of the economy in the coming months, the outlook for business also improved during the month, and the pace of job creations strengthened.”

On the value side, the 2021 results of Faurecia (-5.40% to 37.50 euros) (soon to be called Forvia) received an icy reception, the equipment manufacturer having notably announced a 2nd consecutive net loss, despite the confirmation of its ambitious objectives for 2025. Initially on the rise, Air France – KLM also let its earnings slip away (-0.04% at closing) while Les Echos claim that the Dutch State, Delta Airlines and China Eastern would be ready to participate to its recapitalization. The former boarder of the CAC, Worldline, which took over nearly 3% at the opening after the announcement of its entry into exclusive negotiations with Apollo on the sale of its terminal activities, also tipped into the red (- 2.9%).

A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.1370. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $91.20.

To follow in priority, on the agenda this Tuesday, the IFO index of the business climate in Germany at 10:00 a.m. and the flash PMI (IHS Markit) for the United States at 3:45 p.m.

KEY GRAPHIC ELEMENTS

An oblique line of support gave way on Monday 02/14 under the sectorally federated assaults of the selling side, in a very high level of participation. This release of selling energy at this stage, in a single session (24/01), constitutes a major technical fact which characterizes the hypersensitivity of a market which is increasingly and continuously questioning the levels of valuation of the shares. .

The entry into the bear market is not formally characterized, but the situation calls for the greatest vigilance under this slant. She was reinstated at the very end of the week. We put her under close surveillance. In the immediate future, plotting a wedge in hourly data is not very engaging. The three-color flagship index came out on Thursday, from below, in accelerating volumes, before starting to rise again. A definitive exit from the bottom of this bevel is the preferred option. The break, on a very wide gap on Monday 02/14, is a first decisive step. This gap was almost entirely filled on Tuesday, in the form of a school pullback, in decreasing volumes.

The index has plotted a combination of candles in three crows*. This combination was immediately followed by a very significant bearish engulfing structure, accompanied by volumes that were far from timid for a session, let’s not forget, without American benchmarks. The looming scenario is now that of a new test of 6,760 points, an increasingly fragile technical floor.

* All 3 candlesticks close at or near their lows AND each open must be inside the body of the previous candle.

FORECAST

In view of the key graphic 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 trading below the resistance at 7036.00 points.

Hourly data chart

CAC 40: Putin recognizes the independence of the pro-Russian East Ukrainian territories, the market is stressed (© ProRealTime.com)

Chart in daily data

CAC 40: Putin recognizes the independence of the pro-Russian East Ukrainian territories, the market is stressed (© ProRealTime.com)

©2022 News Bulletin 247

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