CAC 40: Persistent sources of tension

by

(News Bulletin 247) – The CAC index continued to decline yesterday, for the third consecutive close in the red (-0.57% to 6,461 points), the motivation of operators being disturbed by the resolutely offensive tone of the Fed . It is in fact the whole question of the probability of a soft-landing (soft landing) which is posed. “During his speech on price stability, Jerome Powell recognized that the current context did not make a “soft landing” of the economy obvious,” note the strategists of Lazard Frère Gestion in a note on the situation. “In other words, the Fed may need to implement a very sharp slowdown in growth to ease labor market tensions and stem inflationary pressures, which continue to build.”

An offensive tone, not yet aggressive, which raises questions on this side of the Atlantic as well. “While inflationary tensions are expected to persist, the ECB will have”, according to Thomas Giudici, co-head of bond management at Auris Gestion, “no other choice than to accelerate the normalization of its monetary policy, probably more quickly than the market anticipates, with a rate hike starting in September.” As a reminder, the ECB is completing a meeting of its Board of Governors next week.

“The transition from a regime of high inflation and high growth to a regime of high inflation but lower growth obviously impacts the performance of the various asset classes and sectors. The upside potential of equity markets is more limited overall and defensive sectors (health, financials, consumer staples, etc.) are outperforming cyclical sectors”, summarize Laurent Gonon, Director of Investments and Warin Buntrock, Deputy Director of Investments at BFT IM

While investors’ eyes are on the monetary authorities, diplomatic tensions persist and intensify between Moscow and the West. French Foreign Minister Jean-Yves Le Drian again summoned the Russian ambassador to Paris on Thursday, after a tweet deemed “indecent” by the embassy on the abuses committed in the Ukrainian town of Boutcha. The United States for its part announced on Wednesday a new volley of economic and financial sanctions against Russia and, in Europe, the President of the European Council Charles Michel estimated that the EU should “sooner or later” impose sanctions on the Russian oil and gas. Invited to vote, the members of the European Parliament went in this direction by deciding by 413 votes (93 votes against) for the amendment on the oil, gas and coal embargo.

J Biden has just announced a new salvo of sanctions against Moscow, targeting the banking sector and … the dictator’s own daughters. The Kremlin said it was “disconcerted”…

In terms of statistics, the dynamics of German industrial production came out on a monthly basis for February at 0.2%, slightly above expectations. Across the Atlantic, new claims for unemployment benefits in the United States came out in sharp contraction at 166,000 for week 13, beating the target.

On the values ​​side, a certain number of defensive files managed to hold their own, such as Air Liquide (+0.05% to 160.24 euros), Sanofi (+1.56% to 99.91 euros), or even Danone (+ 1.88% to 51.60 euros), among the most emblematic.

On the other side of the Atlantic, the main equity indices managed to very slightly reduce their weekly losses on Thursday, like the Dow Jones (+0.25% to 34,583 points) or the Nasdaq Composite (+ 0.06% at 13,897 points). The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, slid 0.43% to 4,500 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 $1.0860. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $96.30.

To follow in priority, on the agenda this Friday, the stocks of American wholesalers at 4:00 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 harami traced immediately after a reconquest of 6,760 points, for a single closing, that of March 29.

Proposed negative opinion, neutral across the single session to come.

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

CAC 40: Persistent sources of tension (©ProRealTime.com)

©2022 News Bulletin 247

You May Also Like

Recommended for you

Immediate Peak