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Once again, on Friday, the CAC 40 index appeared pressing in contact with 7,500 points, a weakened graphic threshold whose rupture would cause the start of a pronounced bearish leg. The market was able to further observe, through orders for durable goods and the consumer confidence index (U-Mich), the impressive resilience of the American economy, which is widening the gap compared to its European counterpart. France in particular, stuck in debates on an austerity budget, and Germany, whose industrial sector is losing momentum, are weighing in.
After a battery of very contrasting PMI indicators on Thursday, on both sides of the Atlantic, currency traders are looking this morning at the closely followed confidence index in the German economy, the first in the Euro Zone although losing speed. The famous “IFO” came out at 86.5, very slightly above the target. The results of the survey show in particular a chronic underutilization of production capacities, and a continuation at the heart of the “Crisis” box of the economic cycle matrix tool.
“American activity surprises economists and fears of recession have recently been swept away by a series of favorable statistics,” summarizes Emmanuel Auboyneau, associate manager of Amplgest.
“The European economy certainly does not have the same solidity. It is even tangling with negative territories and is even experiencing an industrial recession. Public deficits and debt are another increasingly threatening pitfall which require more effective actions from the States. We see in France the difficulty of reducing public spending and the natural propensity to prefer tax increases that are not favorable to growth. If we add lower than expected inflation and now the Central Bank’s objective, everything now militates for more vigorous action by the latter.”
The market was still busy analyzing the numerous quarterly copies of listed companies throughout the week. On Friday’s session alone, the menu, in this respect, was still very copious.
At the top of the CAC 40, Sanofi gained 2.5% after publishing sales and results significantly above expectations in the third quarter. Renault continues its good momentum, gaining 2.2% after having already gained 4.7% the day before, following its excellent publication of its third quarter. Conversely, Vinci returned 3.4% after publishing disappointing activity in the third quarter.
On the other side of the Atlantic, the main equity indices ended Friday’s session in mixed order, with the Dow Jones contracting 0.61% to 42,114 points and the Nasdaq Composite gaining 0.56% to 18 518 points, very close to the zeniths. The S&P500, the reference barometer of risk appetite in the eyes of fund managers, finished in balance, playing the averages, at 5,808 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 $1.0790. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $68.40. These prices contracted sharply, after the Israeli strikes in Iran having spared the oil installations.
On the macroeconomic agenda this Monday, no significant figures to report. It will be expanded tomorrow with the American consumer confidence index (Conference Board).
KEY GRAPHIC ELEMENTS
The nervous oscillations will continue to be concentrated between two major levels, the 7,465 / 7,500 points on the one hand, and the 7,690 / 7,700 points on the other. A quotation band from which an exit would release additional energy. But in the immediate future, contrary movements, in a clear direction, are still expected. The 7,500 points were under more pressure last week, a risk for the flagship index, which made a foray below on Wednesday October 16 before recovering significantly during the session. New test on October 22, with a low wick on the corresponding candle.
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 7690.00 points would revive the buying tension. While a break of 7465.00 points would restart the selling pressure.
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