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If we have to broadly summarize the market psychology of the last two weeks, we would say that week 24 was marked by a significant decline in the market, after the announcement of the dissolution of the National Assembly, and the entering a period of political uncertainty. And that week 25 will have been marked by a timid rebound of protest, which in one week will have only made it possible to retrace the losses of Friday June 14. The market therefore remains particularly fragile after this rebound without consistency, neither at the level of participation (volumes) nor at the sector level (no federation).
The market remains very upset by the lack of visibility, at this stage, on the color and composition of the next government, and the positioning of the center of gravity of the hemicycle. He fears that populist groups, such as the National Rally, will implement policies that would weaken France’s already shaky public finances.
The macroeconomic data published on Thursday will not have helped. These were the PMIs (surveys of purchasing directors) which came out clearly below expectations across the entire Euro Zone, whether for industry (45.6) or services (52 ,6). It will be recalled that by construction, a “score” above 50 points means an expansion of the sector considered, conversely a score below 50 indicates a contraction. These are the results in preliminary data for the current month.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, provided the following insight: “In France, the deterioration in the economic situation observed in June, both in the manufacturing and services sectors, could be attributable to the results of the last European elections and the announcement by President Emmanuel Macron of the holding of early elections on June 30 and July 7. This unexpected decision has most likely given rise to serious concerns among businesses regarding the economic policies of the next government. and pushed many of them to suspend their orders and investments Whatever the cause, France’s weak economic performance contributed significantly to the decline in the euro zone composite PMI index in June.
On the values side, the cyclical files par excellence suffered, like Astom (-3.80%), Saint Gobain (-3.61%) or Renault (-2.99%).
On the other side of the Atlantic, the main equity indices ended Friday’s session in mixed order, like the Dow Jones (+0.04%) and the Nasdaq Composite (-0.18%). . The S&P500, the reference barometer of risk appetite in the eyes of fund managers, contracted very slightly, by 0.16% to 5,464 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 $1.0700. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $80.60.
On the agenda this Monday, to follow as a priority the IFO business climate index in Germany at 10:00 a.m.
KEY GRAPHIC ELEMENTS
The shoulder, head and shoulder graphic figure traced since April 16 is in the process of breaking its neckline, which corresponds more or less to the gap of February 22, fully filled on 06/11 during the session. The short-term graphic configuration is significantly degraded.
In quick succession, the flagship tricolor index failed two major technical tests: it exited the bottom of a channel on May 29, and as seen previously, it exited the bottom of a chart pattern on June 10. Below 7,900 points, the situation remains worrying.
The “LVMH” gap has been filled. Ample, it was formed on January 26 following the publication of an excellent quarterly report from the luxury giant.
The weekly candle of week 24 testifies to a strong and continuous mobilization of the selling camp throughout the unit of time.
Week 25 was the scene of a timid, sideways reaction, without consistency or conviction, either in terms of participation (volumes) or that of the sectors (no federation).
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 7690.00 points.
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