CAC 40: The technical situation is strewn with pitfalls

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(News Bulletin 247) – The Paris Stock Exchange reopens on Tuesday after a four-day break, Good Friday and Easter Monday being traditionally non-working days. Thursday, the CAC 40 managed to garner 0.72% to 6,589 points, after the Board of Governors of the European Central Bank, which ended in a “verbal turn of the screw”, in the words of Ronan Blanc, Manager Analyst at Financière Arbevel.

“We therefore feel the institution is uncomfortable in a general context of rising rates, at a time when inflationary pressures are beginning to bite on growth. Nature abhors a vacuum, if adjustments cannot be made on rates, they will be based on the currency. The balancing act of wanting to opt for a soft consensus within the Board of Governors risks backfiring on the institution and taking away some of its credibility.”

In terms of statistics on Thursday, operators learned of a surprise rebound in the consumer confidence index (U-Mich, in preliminary data for the current month), to 65.7, well above expectations. Target beaten also for retail sales across the Atlantic (excluding automobiles), for the month of March.

On the stock side, investors welcomed the quarterly sales of Hermès which clearly exceeded consensus expectations (even if it was also the case for LVMH…) and the saddler’s share price rose by 2.7 %, also driving Kering (+1.4%) and LVMH (+0.9%).

On Wall Street, which for its part reopened on Monday, the main equity indices stood still, tracing typical candles of indecision, symbolically in the red in declining volumes. In detail: -0.11% to 34,411 points for the Dow Jones and -0.14% to 13,332 points for the Nasdaq Composite. The S&P 500, benchmark barometer of risk appetite in the eyes of fund managers, ended on a neutral note (-0.02% to 4,391 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 $1.0800. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $103.70.

To follow as a priority, on the agenda this Monday, housing starts and home sales in the United States at 2:30 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 gap on Wednesday March 16 is not a signal to return to buying, and the high volatility phase is therefore not yet over. The configuration, in the form of a combination of candles, in three black crows over the last three sessions of week 12, calls for the greatest caution. As evidenced by the harami traced immediately after a reconquest of 6,760 points, for a single closing, that of March 29. Note the bearish engulfing character of the weekly candle of week 14 on the candle of week 13.

Last week, we avoided the formation of a reversal island under the March 16 gap.

Negative opinion across the upcoming session.

FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.

This bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 6760.00 points.

Hourly data chart

Chart in daily data

CAC 40: The technical situation is strewn with pitfalls (© ProRealTime.com)

©2022 News Bulletin 247

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