CAC 40: Between two major monetary meetings

(News Bulletin 247) – Scottish shower, yoyo, roller coaster, there is no shortage of images to illustrate the large-scale upward and downward variations in the market since February 24 and the break-out of a major technical zone, followed by the beginning of Russian military aggression in Ukraine, which will take the form of a military invasion, still ongoing. If the CAC suffers from an undeniable short-term bearish bias, it is taken by jolts with every hope, however slim, of taking a diplomatic route. The 27, at the end of their summit in Versailles, took a fourth set of sanctions against Moscow.

At the end of a once again very volatile session, the CAC 40 nibbled 0.85% to 6,260 points, with the support of Value files such as Saint Gobain (+ 1.54% to 54.70 euros) , Axa (+1.97% to 24.10 euros), Alstom (+2.06% to 19.80 euros), Publicis (+2.79% to 55.34 euros), Safran (+2.84% to 104.14 euros), ArcelorMittal (+3.48% to 27.69 euros), or Airbus (+3.78% to 103.56 euros).

In terms of statistics, consumer confidence (U-Mich) weighed on the debates, especially across the Atlantic, as the outcome of a monetary policy meeting this week, March 16, approaches. The indicator produced by the University of Michigan is expected to contract to 61.4.

While the Federal Reserve is faced with squaring the circle (“fighting galloping inflation without the economy experiencing a crash landing”), it “has no other choice, it must intervene”, for William Gerlach, France Director of iBanFirst. “On the other hand, it will certainly try to intervene with caution, hence a rise of only 25 basis points.”

J. Powell clearly brushed aside the option of a double hike (ie 50 bps at once) on March 16, when he raised the issue last week, in a semi-annual hearing before Parliamentarians.

“Too much uncertainty remains about the war in Ukraine. In addition, US consumer confidence has fallen sharply. The last two times it was so low and the central bank started a cycle of monetary tightening, it led systematically into a recession. That was in the 70s and early 80s.”

Verdict on Wednesday for this monetary policy decision and for the analysis of the elements of language used at the press conference.

On the other side of the Atlantic, the main equity indices ended the week in the red, like the Dow Jones (-0.69% to 32,944 points) and the Nasdaq Composite (-2.18 % at 12,843 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, fell 1.30% to 4,204 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 $1.0910. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $106.00.

To follow in priority, on the agenda this Monday, the French trade balance at 08:45. The agenda will become very dense tomorrow with in particular the German ZEW, the producer price index and the Empire State index in the United States.

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 would open under 6,000 points, already broken on Monday 07/03, before the formation of a dispute rebound. On Wednesday, March 09, we witnessed a first phase of an explosive protest rebound, which pushed the index back to its 100-hour moving average (in orange in hourly view), a curve that retains a marked downward bias. The bearish harami plotted on Thursday is hardly engaging.

FORECAST

In view of the key graphic 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 a crossing of 6385.00 points would revive the tension in the purchase. While a break of 5826.00 points would relaunch the selling pressure.

Hourly data chart

Chart in daily data

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