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In low volumes but far from being ridiculous in this week marked by two consecutive public holidays, conducive to a bridge for many operators, the CAC 40 amplified its bullish reaction yesterday, managing to close at more than 130 points at above the psychological zone of 8,000 points. It is now the technical threshold of 8,120 points, until now resistance, which will be tested, against a backdrop of rebalancing of the American 10-year bond around 4.50. It was close to 4.74 on April 24, before the publication of a series of indices inviting the Fed to give a little “slack” on the monetary rope.
A decline encouraged by the content of the NFP report on employment published Friday, and confirmed by the words of J Williams (President of the New York branch).
“New York Fed President John Williams said there are signs that households are more cautious in their spending, and he expects rate cuts eventually, although the decision to lower them will depend on all the available data,” report analysts from Natixis CIB Research, cited by Agence France Presse.
“Thus, the Fed could start lowering rates as soon as the summer break ends,” they add.
No sharp statistical figures animated the session on Wednesday, whatever the side of the Atlantic.
On the value side, the CAC 40 was supported by Axa (+2%), which announced an increase in its share buyback program, by 200 million euros, to bring it to 1.8 billion euros. Schneider Electric (+2.2%) also lifted the index and is reaching historic highs on the stock market. Investors have also continued to dissect the results of companies which turn out to be numerous. Alstom gained 9.4%, the market being reassured by the results, the outlook and the debt reduction plan in line with the railway equipment manufacturer’s expectations.
On the other side of the Atlantic, the main equity indices ended Wednesday’s session in scattered order, like the Dow Jones (+0.44% to 39,056 points) or the Nasdaq Composite (-0, 18% to 16,302 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, ended on a note of almost perfect stability at 5,187 points, significantly above the symbolic threshold of 5,000 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 $1.0740. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $79.10.
On the agenda this Thursday, to follow as a priority the monetary policy decision of the Bank of England at 1 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. It is now the level of 8,120 points which plays its role as graphic resistance.
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 cannot be ruled out, 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 8220.00 points would revive the buying tension. While a break of 8000.00 points would restart the selling pressure.
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