(News Bulletin 247) – To what extent the Fed will be able to be “hawkish” without being aggressive, for some time to come, in the inflammable context of the war in Ukraine and its impact on commodity prices. This is the whole question that operators ask themselves. The Fed will probably only be able to answer this tonight in part… “The Fed’s rate hike is expected. But investors will remain attentive to the central bank’s sentiment on inflation and the economy, as well as its projections for future rate hikes”, Eric Lafrenière, US Equities Manager at Richelieu Gestion. An 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. 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.
“Inflation is weighing on consumer morale, as well as Democratic voting intentions. Popular and political pressure is strong and sitting idly by even as inflation nears 10% does not seem be an option. This time, even if the markets were to suffer, the Fed should remain severe”, for Frédéric Rollin, investment strategy advisor at Pictet AM.
The economic pressure is just as strong. “Despite inflation of 7.9% observed in February in the United States, the Fed is maintaining an ultra-accommodating monetary policy.” notes Vincent Boy for IG France. “Indeed, Jerome Powell is trying by all means not to impact the markets too negatively, which seems to remain the main factor in the evolution of monetary policy. The latter has remained very accommodating so far, despite the economic rebound observed. in 2021 and now with fears of a recession looming, the US Federal Reserve Chairman is stuck between letting inflation pick up or causing markets to fall sharply in anticipation of a global economic slowdown and a recession.”
On the statistical side yesterday, across 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 most wide, on a monthly basis. Very marked disappointment on the side of retail sales, the momentum of which collapsed in February (+0.3% on a monthly basis against +4.9% in January).
The pressure remains high, even if the opening in the green is looming, amid fears of a decrease in activity of key suppliers, in particular in the Shenzen region, in the context of an upsurge in Covid cases in China.
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 whole 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, however, 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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