CAC 40: Below 7,340 points, the configuration remains very fragile

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At the end of a still very volatile week, marked by nervousness, the CAC 40 will have lost 0.58% to 7,270 points on Friday, at the heart of its new working framework, between 7,200 points (fragile support) and 7,340 points (solid resistance).

The markets took note of a new battery of American statistics Friday afternoon, including retail sales for the month of October. A key measure of American consumer sentiment, they increased by 0.4% compared to September, and thus slightly exceeded the expectations of economists (+0.3%). The September figures were revised upwards, with an increase of 0.8% against an initial forecast of 0.4%. Furthermore, the “Empire State” index, the NY Fed’s manufacturing index, for its part exploded expectations, jumping from -11.9 to 31.2 points.

“The strength we are currently seeing in the economy allows us to approach our decisions with caution. Ultimately, the trajectory of policy rates will depend on the evolution of economic data and outlook,” he added . These statements were considered restrictive by the market. “It was a cold shower of reality for stock traders, who had pushed US stocks to an 11-year high after Trump’s victory,” says Spi AM’s Stephen Innes. It is therefore the shape of the downward curve of the remuneration of the Fed Funds which is disrupted.

These tensions were reignited last week by Powell, Chairman of the Fed, during an event organized at the federal branch of the Fed in Dallas. Based on the very good health of the American economy, he explained that a rapid rate cut was not justified, and that there was no urgency in the ongoing monetary easing process. A tone considered less dovish, if not more hawkish than expected. In the process, and according to the CME Group’s FedWatch tool, the probability of a status quo monetary at the end of the next FOMC jumped to 37.4%. The American 10-year, for its part, continues to simmer in the immediate vicinity of 4.43%.

In the securities department, Sanofi pulled the CAC 40 down and fell 3.3%. Like other stocks in the pharmaceutical world – Sartorius Stedim Biotech lost 6.7% and Valneva 6.8% – the stock was penalized by the appointment of Robert Kennedy Jr, a notorious vaccine skeptic, at the head of the US Department of Health. This appointment also rocked the advertising sector, which is also in the sights of Robert Kennedy Jr, because it is threatened by a ban on advertising for prescription drugs in the United States. The biggest drop in the CAC 40, Publicis fell by 5.4%. Excluding CAC 40, Vallourec gained 6.4% after publishing quarterly results showing faster than expected deleveraging, according to Oddo BHF. Nexans fell 4.5%, suffering from the sale of shares by Bpifrance.

On the other side of the Atlantic, the main equity indices fell on Friday, like the Dow Jones (-0.70%) and the Nasdaq Composite (-2.24%). The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.32% to 4,794 points.

An update on other risky asset classes: around 8:00 a.m. this morning on the foreign exchange market, the single currency was trading at a level close to $1.0540. The barrel of WTI, one of the barometers of the appetite for risk on the financial markets, was trading around $67.10.

On the macroeconomic agenda this Monday, to follow as a priority, the trade balance in the Euro Zone at 11:00 a.m., as well as the NAHB index of the American residential market at 4:00 p.m. Also worth checking out, at 7:30 p.m. today, is a speech by Ms. Lagarde, entitled “The economic and human issues of a changing era” during an event organized by the Fondation des Bernardins, in Paris.

KEY GRAPHIC ELEMENTS

With a candle with a long red body on Tuesday, November 12, the index defined the amplitude of a new working base, between 7,200 points on the one hand and 7,340 points on the other hand, which we switch to chart resistance zone. The thick volumes of this key session, combined with the opening gap, give meaning to the threshold break.

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 7340.00 points would revive the buying tension. While a break of 7200.00 points would restart the selling pressure.

Hourly graph

Daily Data Chart