(News Bulletin 247) – First of all, it should be noted that the East Coast of the United States switched to daylight saving time this weekend, which means that, in the two-week interval before we go there at our turn, Wall Street will open at 2:30 p.m. (Paris time) and the statistical appointments, for some usual at 2:30 p.m., will be published at 1:30 p.m.
All eyes are now on the Fed, which will end a new meeting of its Monetary Policy Committee (FOMC) on Wednesday, a meeting at a key moment when the monetary institution headed by J. Powell is faced with a dilemma: how initiating a monetary turn in the thick fog caused by the conflict in Ukraine, whose consequences for global growth are still unclear, and in the context of a chronic increase in energy prices. 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.
“But investors will remain attentive to the central bank’s sentiment towards inflation and the economy, as well as its projections for future rate hikes” adds Eric Lafrenière (Richelieu Gestion). “Powell called the Russian invasion of Ukraine a “game changer” that could have unpredictable consequences. how central bank officials view the Ukraine crisis and how that might affect their outlook and the path of interest rates.”
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.”
“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.”
This issue of consumer confidence is central in the world’s leading economic power, whose creation of national wealth (GDP) is “pulled” mainly by domestic consumption. However, on Friday, the preliminary data for the consumer confidence index (U-Mich for University of Michigan) contracted more than the consensus had predicted.
No statistics of major importance are on the agenda this Monday. On the other hand, it will become very dense as of tomorrow with in particular the German ZEW, the producer price index and the Empire State index in the United States.
KEY GRAPHIC ELEMENTS
As a reminder, here are a number of key elements presented in our previous technical and graphical analyzes on the index: “Congestion is expected between 13,330 points and 14,445 points, i.e. a wide band where the nervousness of operators. In the event of an exit from the bottom, especially in thick volumes, the technical situation becomes problematic. Week 07 was in this respect with very high technical stakes. The weekly closing level, of importance, is practically on lows of the week.”
In the light of the strength of the breach of this threshold, the 13,330 points are swung into major resistance, even if the index came to end Thursday’s session above it. The technical conditions of the breakout are indeed eloquent: bearish engulfing lined with a school black marubozu. The sales mobilization will have lasted the entire session.
The buying mobilization throughout the session on Thursday 02/24 is impressive and further validates the entry into a phase of high volatility. However, we remain negative below 13,330 points for the time being. After a short phase of rebalancing forces, where volumes will be put under close watch, the formation of a next bearish leg is envisaged. In the immediate future, after a short phase of perilous rebalancing, in divergent volumes, the scenario of a resumption of the decline below 13,330 takes place. Positive opinion on the scale of the only session to come.
FORECAST
Considering the key chart factors we have mentioned, our opinion is positive on the Nasdaq Composite index in the short term.
This bullish scenario is valid as long as the Nasdaq Composite index quotes above the support at 12640.00 points.
CHART IN DAILY DATA
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