(News Bulletin 247) – New session of intense volatility on the Paris Stock Exchange on Tuesday, where the CAC 40, after having recorded high points at 6,170 points, finally closed in the red (-0.32% at 5,962 points) , under the weight of significant losses in growth and luxury files, such as LVMH (-3.12% to 550.10 euros), Hermès (-5.55% to 1,080.20 euros), Téléperformance ( -7.40% to 298.90 euros) or Dassault Systèmes (-7.44% to 40.16 euros). The decision by Joe Biden to order an embargo on the import of natural gas and Russian oil into the United States will have weighed on Wall Street, the barrel of Texan light crude once again exceeding $125.
Operators are gradually turning to tomorrow’s outcome of a new Board of Governors of the European Central Bank (ECB). If on the side of the Fed the equation is probably less complex, it is the question of the angle of the monetary turn to come that arises. While a 50 bp increase in Fed Funds was almost unanimous not long ago, an increase of only 25 bp is the scenario now clearly envisaged, by J. Powell himself in a half-yearly hearing before the Parliamentarians. First elements of response on March 16 at the end of the FOMC (Monetary Policy Committee).
“For the ECB, which is holding its monetary policy meeting this week, the situation is more complex”, according to T. GIUDICI, “because the zone is more directly impacted by the Russian-Ukrainian situation. If the insinuations (and the non- said) by Christine Lagarde in February were campaigning for a more hawkish ECB, she could finally catch up with the branches of the December decisions which provided for an increase in the APP (to compensate for the PEPP) until the end of the year before a possible first rate hike in 2023.” First elements of response this Thursday at the end of the Board of Governors.
In the macroeconomic chapter, inevitably relegated to the background once again yesterday, we should nevertheless mention the encouraging figures for the dynamics of German industrial production (+2.7% in January on a monthly basis), very largely beyond expectations. In addition, the NFIB index of small American companies, published at 12:00 (Paris time) disappointed by contracting to 95.7 points.
On the other side of the Atlantic, the main equity indices closed in red territory, after a volatile session, like the Dow Jones (-0.56% to 32,632 points) or of the Nasdaq Composite (-0.28% to 12,795 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 0.72% to 4,170 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 $1.0920. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $126.00.
To follow in priority, on the agenda this Wednesday, in the United States new job offers (JOLTS) at 4:00 p.m. and crude stocks at 4:30 p.m.
KEY GRAPHIC ELEMENTS
The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap on Thursday 02/24, 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 has thus begun. 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 07/03, before the formation of a contested rebound. Until then, a short moment of capitulation across all sectors and value styles is not excluded. Above all, a first technical rebound is being formed.
FORECAST
In view of 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 above the support at 5826.00 points.
Hourly data chart
Chart in daily data
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