CAC 40: Volatility still just as intense as the Fed verdict approaches

(News Bulletin 247) – The CAC 40 index ended Tuesday’s session not far from equilibrium (-0.23% to 6,355 points), a good distance from its session lows, with the support of the continued decline in energy prices, in particular crude oil prices. The barrel of Texan light crude (WTI), which had been flirting at its highest since the start of the war in Ukraine with $130, fell back below the highly symbolic threshold of $100. Wall Street took the opportunity to gain ground, on the eve of the highly anticipated outcome of a meeting of the Monetary Policy Committee.

“The Fed’s rate hike is expected. But investors will remain alert to the central bank’s sentiment toward inflation and the economy, as well as its projections for future rate hikes,” Eric Lafrenière, US Equity Manager at Richelieu Gestion.

The increase of 25 basis points, clearly announced by Powell himself in a semi-annual hearing before the Parliamentarians, is indeed acquired, and an increase of 50 basis points at once would constitute an extraordinary surprise.

“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,” Lafrenière continued.

Verdict at 7:00 p.m. for the Fed’s monetary policy decision, rates and updated economic forecasts, and at 7:30 p.m. for the press conference.

The conflict in Ukraine continues to focus managers’ attention. As Russian artillery continues to ravage major Ukrainian cities, regardless of civilian casualties, negotiations between Ukraine and Russia still seem to have stalled. Another point of tension on the planet, the American forces stationed in South Korea are increasing the intensity of the exercises of their anti-missile defense system, in fear of a new long-range missile test from North Korea.

In the macroeconomic statistics chapter, note the catastrophic publication, completely lacking in already pessimistic expectations, of the ZEW confidence index in the leading economic power in the Euro Zone. The indicator, often called in its contracted form “ZEW”, emerged this month in free fall, at -39.3, the lowest since March 2020, that is to say since the movement of fear caused by the spread of Covid-19. On the other side of the Atlantic, the producer price index relieved the markets somewhat, rising less sharply than expected, by 0.8% for the month of February, for the widest basket of products, in pace monthly.

On the values ​​side, the operators logically distance themselves from the cyclical segments of the market such as ArcelorMittal (-1.69%) or Alstom (-3.55%), which had rebounded well in the last two days. Luxury (-1.31% for Kering, -3.13% for Hermès and -1.45% for LVMH) or aeronautics (Safran -2.05%, Airbus -1.38%) are also penalized.

On the other side of the Atlantic, the main equity indices gained ground on Tuesday, like the Dow Jones (+1.82% to 33,544 points) or the Nasdaq Composite (+2.92% to 12,948 dots). The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers,

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 $1.0970. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $98.00.

To follow in priority, on the agenda this Wednesday, retail sales across the Atlantic at 1:30 p.m.

Please note that the East Coast of the United States has switched to daylight saving time this weekend, which means that, in the two-week interval before we also go there, Wall Street will open at 2:30 p.m. ) and the statistical appointments, for some of them usually at 2:30 p.m., will be published at 1:30 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 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 harami bearish plotted on Thursday is hardly engaging.

For the time being, a resumption of contact with the 20-day moving average (in dark blue) is the preferred option.

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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