(News Bulletin 247) – The CAC 40 (-0.28% to 6,537 points) ended Tuesday’s session admittedly in the red, but a good distance from its session lows, with the relative relief caused by the publication of US inflation figures. In detail, the consumer price index, in data core (adjusted for food and energy, highly volatile data), gained 0.3% in March, month-on-month. So much for core inflation. On the other hand, taking into account the largest basket of products, monthly growth is 1.2%, in line with expectations.
After making a foray above 2.83 yesterday, 10-year US government bond yields are therefore falling back towards 2.73, on the back of relief from the Fed’s recent tightening of stance. Not enough to sweep away any likelihood of seeing the next FOMC result in a 50 basis point rise in Fed Funds.
The ECB for its part completes a new meeting of its Board of Governors tomorrow. If on the side of the Fed, the monetary turn is intended to be offensive, including in the camp of the members reputed to be the most “dovish” (dove, that is to say follower of flexibility in monetary matters), “on the side of the ECB, the message is a little more blurred”, for Thomas Giudici, co-head of bond management at AURIS Gestion. “If the path of tightening is certain, divergences remain between the members. While some believe that an accelerated monetary tightening would have little or no impact on inflation, essentially driven by oil prices energy, the most hawkish members believe, on the contrary, that the ECB’s inflation forecasts are far too optimistic (return to 2% from 2023) and are therefore less patient in the face of the uncertainty generated by the Ukrainian crisis.
The German ZEW index of confidence in the economy continues to sink, admittedly at a slightly slower pace than expected. At -41.0, it has nevertheless experienced a low point since the March 2020 lockdowns. Professor Achim Wambach, President of the Zentrum fur Europaische Wirtschaftsforschung, shed the following light: “The ZEW economic climate indicator remains at a low level Experts are pessimistic about the current economic situation and assume that it will continue to deteriorate The fall in inflation expectations, which roughly halves the considerable increase of the previous month, gives reasons for hope. However, the prospect of stagflation over the next six months remains.”
Investors will naturally continue to keep a close eye on the conflict in Ukraine. The American President has passed a semantic milestone by qualifying as “genocide” the action perpetrated by the Russian army. “Not sure that verbal escalation will advance the cause”, commented the French President candidate for his own re-election, this morning on France 2.
On the stock side, metal and ore producers stood out, notably Eramet (+3.56% to 154.20 euros) and ArcelorMittal (+2.27% to 29.28 euros), as well as the oil services companies Maurel & Prom ( +5.08% to 4.96 euros) and CGG (+7.49% to 1.059 euros) while the giant TotalEnergies fell 0.43% to 46.425 euros.
On the other side of the Atlantic, the decline in the indices will have been slowed down by the publication of core inflation, the Dow Jones dropping only 0.26% on Tuesday to 34,220 points and the Nasdaq Composite 0.30 % at 13,371 points. The S&P 500, the reference barometer of risk appetite in the eyes of fund managers, symbolically contracted by 0.34% to 4,397 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 $1.0840. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $101.00.
To follow as a priority, on the agenda this Wednesday, the producer price index in the United States at 2:30 p.m., as well as crude stocks, still across the Atlantic at 4:30 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.
the pullback of Friday 25/02 will have been of surgical precision. 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.
Yesterday we avoided the formation of a reversal island under the March 16 gap. Neutral opinion across the upcoming session.
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 breakout of 6055.00 points would relaunch the selling pressure.
Hourly data chart
Chart in daily data
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