Summary

Last week, negative readings from the US surprised markets. The only positive news was a revision of annualized GDP for the third quarter (from 3.5 to 3.9 %). Important readings as consumer confidence, Chicago PMI index and durable goods orders excluding means of transport were disappointing. These weak numbers did not stop Wall Street from further gains as weaker data are deferring interest rate increases. As a result, the S&P500 index scored six positive sessions in turn, finishing with a symbolic weekly gain of 0.2%. European parquet performed even better. Better Ifo index tug the DAX by 2.6% close to the record at 10 000 points. The CAC40 and the FTSE250 grew by 1%.

Again, results achieved by the Warsaw Stock Exchange cannot be considered as a success. The WIG20 lost 0.1%, the WIG250 was unchanged and the WIG50 gained 0.9%. Energy sector performed poorly as investors are afraid that energy companies will be first for the rescue of the mining sector. Despite an increase of medium-sized companies, it was another poor week on WSE. It was despite strong macro data from Polish economy. October retail sales growth was better than expected and the final reading of GDP for the third quarter confirmed dynamics of a preliminary reading of 3.3% y/y. The structure of growth, with a predominance of domestic demand, and acceleration in private consumption indicates the strength of the Polish economy. No positive correlation of these results with a performance of polish indices can be explained by the fact that these data reduce the chances of a December interest rate cut (MPC meeting this week). In the context of the Council decision the PMI manufacturing index published on Monday the 1st would be quite important.

A fear that the WSE will miss a potential Santa Claus rally is becoming real. Risk for the Warsaw Stock Exchange is also the fact that it will be vulnerable to a correction on global stock markets, despite the fact of a little impact of prior increases. The driving force behind growth in the euro zone index is an expectation for a policy easing by the ECB, which supports the WSE less due to the lack of being a direct beneficiary of these programs. This week the WSE, should be sensitive to data from Europe and the USA. Today a series of industrial PMI and ISM from the US would be realised. In the following days important would be indices for the services sector, the ECB meeting and monthly data from the US labor market, where the impact of the November attack of winter could be seen.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

The WIG20 scored a low volatility week, falling by 0.1% . On the positive side bulls may include the maintenance of the more than 2400 points, while the negative would be a continuation of stagnation with little activity. Technically this is a small trade rationale that the WIG20 is approaching the issue of the formation of a triangle, where immediately before the stroke turnover decreases. Breaking up, along with overcoming resistance of 2476 points will open the way for 2560 points. The drop below 2385 points will result in support levels check at 2350 or 2300 pts.

Graph 2. Kernel daily. Source: Stooq

After reporting strong quarterly results Kernel finished week with a strong 19.2% gain. This move confirms construction of a new wave of growth in the short upward trend but the key is to break the resistance at 30 PLN. After such a strong growth, which will probably not happen immediately, the price will enter a phase of consolidation between 27 and 30 PLN. It will be technically suitable before breaking a 35 PLN level. Turnover on the recent rally was rising which is positive for the bulls. A buy signal will be negated with a decrease below 27 PLN. Then, instead of larger upward trend we could only talk about correction in a long-term structure of the ABC downward trend.

Authors: MM Prime TFI S.A. Investment Management Team

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