(News Bulletin 247) – Another session of very high volatility for the Paris market yesterday, whose flagship index, the CAC 40 ended down 1.31% at 5,982 points, with very distant extremums (low point at 5 756 points and high point at 6,115 points!) against a backdrop of continued Russian bombardments in Ukraine and the explosion in the prices of certain raw materials. In the end, the body of the candle drawn yesterday, even green, is entirely positioned below the close of Friday’s marubozu, suggesting at this stage a continuation of the decline. The hour of the technical rebound, probably close, has not yet sounded.
“The world today is not able to function in the short term without Russian fossil resources, whether we are talking about oil, gas or even coal.” warns Benjamin LOUVET, Raw Materials Manager at OFI AM. “In the event of even a partial disruption of supply, prices will have to rise to a level sufficient to start destroying demand. We estimate this level at $120 / $130 a barrel for oil. But given the amount of demand to destroy, especially if countries decide to stand up against Russia by banning Russian gas on their own, the upside could be bigger and black gold head above $150 a barrel .”
the Euro Zone investor confidence index (Sentix), plummeting to -7.0, the lowest since November 2020. Sentix is ​​an analysis firm specializing in behavioral finance. The indicator produced is calculated after analysis of a questionnaire sent to 2,800 investors and analysts on their economic forecasts for the Euro Zone within six months.
As a reminder on Friday, the NFP (Non Farm Payrolls) report, the federal monthly employment report, highlighted job creations much higher than expected (+678,000 in the non-agricultural private sector) as well as a stronger contraction. albeit expected unemployment rate, at 3.8% of the active population. Tensions in the labor market are still strong, and this is one of the sources of future inflation.
In terms of values, schematically, only two sectors find favor in the eyes of investors: on the one hand defense (with another +6.6% for Thales, which has gained almost 50% since the start of the year) and on the other commodity producers, particularly in energy and metals. Held back by the threat of having in turn to draw a line under its assets in Russia, TotalEnergies still grabs 0.8%. Oil services benefit much more frankly with 13.4% for Schlumberger, 7.4% for Vallourec or 9.8% for CGG. Eramet (+12.4%) and Maurel and Prom (+12.3%) also benefited from the surge in prices, respectively of metals and oil. Particularly resilient since the start of the armed conflict (+1.8% over one month), Dassault Systèmes is also advancing by 3%.
Conversely, the way of the cross continues for Engie (-5.9%), Alstom (-5.3%), Renault (-5.3%) or Société Générale (-4.2%). Crédit Agricole lost 2.4% while the bank assessed its exposure to Russia and Ukraine at 0.6% of its commercial commitments. Danone is maintaining “for now” its production and distribution of fresh dairy products and infant nutrition in Russia, to meet the basic food needs of civilian populations, but is suspending any new investment in the country.
On the other side of the Atlantic, penalized among other things by the dynamics of crude, the main equity indices unscrewed on Monday, like the Dow Jones (-2.37% to 32,817 points) and the Nasdaq Composite (-3.62% to 12,830 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 2.95% to 4,201 points.
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 $1.0860. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $123.00.
To follow in priority, on the agenda this Tuesday, the NFIB index of small businesses at 12:00 p.m. and the American trade balance at 2:30 p.m. Target beaten for German industrial production, published at 08:00, up 2.7% for January month on month.
KEY GRAPHIC ELEMENTS
The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap, opening the way to a new market phase. Recall that the index traced from February 16 to 18 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 due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive. Friday 25/02’s pullback was surgically precise. A phase of high volatility begins. The school marubozu drawn on Tuesday 01/03 is a first step. Second stage Friday 04/03 with a candle of the same type (opening on the high points, closing on the low points) in even more fed volumes. A new bearish leg opens under 6,000 points, broken on Monday, before the formation of a rebound of challenge. Until then, a short moment of capitulation across all sectors and value styles is not excluded.
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 6000.00 points.
Hourly data chart
Chart in daily data
©2022 News Bulletin 247
I am currently a news writer for News Bulletin247 where I mostly cover sports news. I have always been interested in writing and it is something I am very passionate about. In my spare time, I enjoy reading and spending time with my family and friends.
