Summary

Last week finally brought the long-awaited wave of optimism on the Warsaw Stock Exchange. Since the beginning of the week most of stock exchanges were dominated by bulls. It was the response to poor payrolls from the previous Friday, which the market considered as a postponement of the beginning of the rate-hiking cycle in the United States. It seems that after the poor recent period of time through a lower risk aversion foreign investors are coming back to emerging markets. It was also noticeable in Warsaw's blue-chip index, where growths were accompanied by increased turnover every day last week. On the other hand, if these increases are built by the wave of the delay of the expected date of policy tightening, which will surely come sooner or later, we should consider how sustainable these growths are. Last week, after a two-day meeting the MPC left interest rates unchanged. It means that the key reference rate stayed at 1.5%. Among the most important macroeconomic data in Europe, the final services PMIs for major economies came in a little softer than the preliminary flash readings. When it comes to the main European stock exchanges, in the week ended 9th October the DAX soared 5.7%, the CAC40 gained 5.4% and the FTSE250 rose 1.7%. It was very successful week for the Warsaw Stock Exchange as well. The WIG rose 4.9%, while the WIG20 soared 5,3%. The mWIG40 and the sWIG80 also did very well with 5.4% and 2.8% increase respectively. However, it is worth pointing out that the bulls had definitely more to catch up among the WIG20 stocks.

Last week was also very successful for the bulls across the ocean. Investors had already discounted the weak payrolls during the previous Friday, but last week stock prices kept rising. When it comes to the macroeconomic data form the U.S. economy released last week, the services sector underperformed. The services PMI came in weaker than the preliminary reading. While the ISM services index came in weaker than expected. Minutes of Federal Open Market Committee's September meeting were published last week. We can read there that FOMC members believe that the U.S. economy is almost ready to raise interest rates. However, due to concerns about the negative impact of slowing global economic growth on the American economy, it will be better to wait longer with the decision. In the week ended 9th October the S&P500 rose 3.3%, the NASDAQ gained 2.6%, while the DJIA was up 3.7%.

This week will not be rich in macroeconomic data. However, it is worth paying attention to the CPI and PPI indices for individual economies, as well as an important data from the U.S. economy - reports on retail sales and industrial production in September.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

It was a very successful week for the WIG20. Within the last 5 sessions the index rose 5.3% and formed a long white candlestick on the weekly chart. However, it is worth pointing out that so far the movement is only a correction after recent declines. The nearest resistance is found around 2,200, or the September peak. The support is based around 2,107. If the demand side manage to break above the resistance level, it will be an opportunity to create a double-bottom pattern (the lows from August and September). Now the bulls are facing an important task.

Graph 2. KGHM daily. Source: Stooq

It was a very successful week for KGHM. Within the last 5 sessions the price rose 21.1% as the commodity prices rebounded. From a technical point of view, the situation looks optimistic. Last week the short-term resistance at PLN 90.50, or a local maximum from 17th September was broken. Elevated volume was the confirmation of the recent increases. Thereby a short-term buy signal has been generated. However, it should be noted that the long-term situation does not look so optimistic. Since January 2013 KGHM has been moving in the long-term descending channel. The next relevant resistance is based around PLN 96. While the near-term support is located at the previous resistance at PLN 90,50.

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

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