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The CAC 40 (61.23% yesterday at 7,423 points), continued to form its pullback towards the resistance zone of 7,465 points, a level that had been violently broken at the beginning of the month amid fears of the world’s largest economy entering a recession. A dark scenario that has since faded, particularly in light of the publication yesterday of a salvo of reassuring statistical indicators on consumption and employment.
Good mood has therefore taken over the financial markets after a stronger than expected increase in retail sales in the United States last month. The American consumer barometer rose by 1% over one month in July, exploding the consensus which was counting on a much more modest increase of +0.2%. In June, retail sales had fallen by 0.2%. On the American employment side which had been a major concern in recent weeks, the lights are also green. Applications for unemployment benefits fell more than expected, to 227,000 the previous week, which is well below the 235,000 applications expected by the consensus cited by Dow Jones. As for the monthly federal employment report, although missing expectations, it is not far from the consensus, whether in terms of production volume or the rate of utilization of productive capacities.
Enough, after a few days of stress, to bring back to the forefront the ideal “Goldilocks principle”. In economics, the “Goldilocks principle” describes a situation where growth reaches a modest but real pace, without creating too much inflation. In other words, activity is neither overheating nor in a slowdown phase that would suggest a recession threatening employment.
Markets are now pricing in a 0.25 percentage point cut, with recent data from the US not supporting a larger move. According to CME FedWatch, the probability of the Fed cutting rates by a quarter of a percentage point has actually risen a notch to 74.5% from 62.5% after the release of this battery of better-than-expected statistics.
On the value side, tech was in the spotlight, among a number of files shaken up over the last two weeks. Thus, STMicroelectronics gained 2.40%, Wordline 2.82%, Soitec 3.32%, XFab 3.46% and OVH 10.20%.
On the other side of the Atlantic, the main stock indices relied on this series of rather reassuring economic statistics to progress, like the Dow Jones (+1.39% to 40,563 points) or the Nasdaq Composite (+2.34% to 17,594 points). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, gained 1.61% to 5,543 points.
An update on other risky asset classes: around 8:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1,0985. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $76,850.
On the agenda this Friday,
KEY GRAPHIC ELEMENTS
The leading index of the Paris market has broken the graphic level of 7,465 / 7,500 points, a floor weakened since June 14. The selling energy released is significant, in light of the inability to fill the opening gap, and in light of the increasing transaction volumes. The message delivered is negative.
This level of 7,465 points corresponds to the lower limit of a former gap (26/01). At the time, LVMH excited the market with a quarterly copy of excellent quality. Market which is in a completely different psychological disposition this summer.
On Wednesday, July 31, the index completely filled the downward gap of July 24, bringing additional heaviness to the short-term configuration. On Thursday, August 1, it broke again the 7,465 points, with closing on the low points of the session, triggering the formation of a new bearish leg. This leg is in full expression phase.
The timid reaction of Wednesday 07/08 should give way, due to lack of conviction, to a continuation of the clearances. It will be essential to observe, in addition to the volumes, the participation of this or that sector in the decline. The very clear price/volume divergence in week 32 is cause for concern.
On the scale of the upcoming session, however, a continuation of the buying reaction is expected. And this until the completion of the pullback (graphic rejection) on 7,465 points.
FORECAST
Considering the key graphic factors that we have mentioned, our opinion is positive on the CAC 40 index in the short term.
This bullish scenario is valid as long as the CAC 40 index is trading above the support at 7200.00 points.
The News Bulletin 247 council
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