CAC 40: Easy digestion of the relatively offensive tone of the Fed

(News Bulletin 247) – Buoyed by the hope of a ceasefire in Ukraine, the Paris market gained 3.68% to 6,588 points yesterday for its flagship index, the CAC 40, in heavy volumes. It is expected on Tuesday to rise slightly on Thursday, after the easy digestion of an (expected) increase in federal interest rates (Fed Funds) of 25 basis points. Yesterday’s FOMC was above all an opportunity, beyond the monetary decision itself, to set the tone for the months to come. The Fed has been aggressive in tackling soaring inflation, and has hinted that it may raise rates at every monetary policy meeting this year. Across the Atlantic, equity markets rebounded strongly.

However, the macroeconomic statistics were not in favor of a renewed appetite for risk. After a catastrophic German ZEW on Tuesday, retail sales in the United States completely missed their target yesterday: the momentum collapsed in February (+0.3% month-on-month vs. +4.9% in January ).

In terms of values, the automotive, tech and luxury sectors once again dramatically amplified market variations, such as Christian Dior (+6.87% to 607 euros), STMicroelectronics (+7.48% to 37.78 euros), Hermès (+7.54% to 1,197.50 euros), Renault (+7.72% to 24.765 euros), Faurecia (+8.48% to 26.22 euros), Valeo ( +9.64% to 16.035 euros) and Soitec (+9.82% to 162.20 euros), with the support for the latter of the confirmation of a recommendation to purchase by an influential analysis office.

On the other side of the Atlantic, the main equity indices gained ground on Wednesday, in particular with a marked Growth bias, the Dow Jones gaining 1.55% to 34,063 points, and the Nasdaq Composite jumping 3, 77% at 13,436 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, rose 2.24% to 4,357 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 $1.1040. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $97.10.

To follow in priority, on the agenda this Thursday, across the Atlantic, the Philly Fed and registrations for unemployment benefits at 1:30 p.m., and the monthly report on industry at 2:15 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 bearish harami plotted on Thursday is hardly engaging.

The gap on Wednesday 16 is not a signal to return to buying, and the high volatility phase is not over.

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 6760.00 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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