CAC 40: A technical barrier at 8,120 forms

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Below 8,120 points, which is more of a graphic level of resistance, the CAC fell a little on Monday, in the absence of major macroeconomic statistics – this Tuesday will be rich in this respect – and as we approach of an FOMC (Monetary Policy Committee) of the Federal Reserve.

The big meeting of the week remains the meeting of the American Federal Reserve (Fed) on Wednesday evening. And this after last week’s figures which argued for keeping rates at a high level. If the start of a rate cut may see the light of day this year, it will certainly not signal the start of an unbridled loosening of credit conditions.

“For the markets, the interest rate has become the dominant criterion – and they want to see it fall,” says Alexander Raviol, partner and CIO Derivative Solutions at Lupus Alpha. “But the American economy is overflowing with strength. Thus, after strong data on the job market in mid-April, the first doubts about an upcoming easing of the Fed appeared. When, a few days later, American inflation was not contained as expected, the favorite sport of interpreting the Fed’s messages resumed with a vengeance.”

The trajectory of future rates therefore resembles a very slightly descending altitude plateau.

“Already, the market has adopted the scenario of higher key rates for longer. (…) We still think that the Fed could cut rates twice. This is based on our view that the economy should decelerate more significantly from the summer onwards. A scenario of no rate reduction is possible in the event of a much stronger resilience of the activity than what we envisage”, develops Sebastian Paris Horvitz of LBPAM.

Published on Friday, excluding food and energy, PCE (personal consumption expenditures), the Fed’s favorite barometer in its assessment of inflation, showed a monthly increase of 0.3%, perfectly within the target. Not enough, therefore, to influence the outlook for the trajectory of rates for the months to come. However, as Jeanne Asseraf-Bitton notes, over one year, “PCE inflation is higher than expected in March at 2.7% per year in total and 2.8% in the “core”. Over 3 months (annualized) , “core” inflation accelerates to 4.4%, driven by services to 5.5%.”

“Even though American growth was less good than expected in the first quarter, the pressure on prices has not made any progress, thus reinforcing the feeling that the Federal Reserve still has no more argument to trigger the first rate cuts,” laments Alexandre Baradez (IG France).

Remember that the gross domestic product (GDP) of the United States grew less than expected, by 1.6% in the first quarter, according to a first estimate. Economists surveyed by the Wall Street Journal, for their part, expected an increase of 2.2% on an annual basis. Meanwhile, inflationary tensions persist since the underlying inflation indicator increased against all expectations, by 3.7% over the first three months of the year, after 2% in the fourth quarter.

No statistical figures came to support this reflection on Monday, in trading rooms which remained focused on the continuation of the quarterly ball of the large groups, a ball so far very mixed.

Vivendi has already published its turnover this Monday, which left the market unmoved (-0.1%). The stock market is more focused on the plan to split the company into several listed companies.

Atos jumped 19.2%, the market being reassured to see the French State submit an offer of 700 million to 1 billion euros to take over certain activities, and therefore bring new money to a group which has badly needed.

On the CAC 40, Stellantis, Thales, Teleperformance, and even Capgemini will deliver their publications this week.

On the other side of the Atlantic, the main equity indices managed to gain a few points on Monday, such as the Dow Jones (+0.38% to 38,386 points) or the Nasdaq Composite (+0.35%). at 15,983 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, increased by 0.32% to 5,116 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 $1.0700. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $82.10.

On the agenda this Tuesday, to follow in priority the first estimate of consumer prices in the Euro Zone for April at 11:00 a.m. and across the Atlantic, the cost of labor at 2:30 p.m., the S&P CS real estate price index at 3:00 p.m. and the consumer confidence index at 4 p.m.

KEY GRAPHIC ELEMENTS

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.

Then a major technical event occurred, namely the breaking of the gap, the highly symbolic threshold of 8,000 points. The latter, however, does not appear as a scar on the index in the sense that it was filled in from the following session.

We are in the heart of a deep, legitimate breath on the flagship tricolor index.

Two bearish targets present themselves: the bullish gap of February 22, the lower limit of which is worth 7,821 points, then the intermediate support at 7,700 points. Until then, the occasional formation of sharp downward acceleration in prices is not excluded, before remobilization of the buying camp.

FORECAST

Considering the key graphical factors that we have identified, our opinion is neutral on the CAC 40 index in the short term.

We will take care to note that crossing 8120.00 points would revive the buying tension. While a break of 8000.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart