Summary

At the beginning of last week downward correction on equity markets was continued, and in some markets has noticeably accelerated. It started with a series of weaker readings from German economy (the DAX lost about 10% over 3 weeks, and about 16% from its peaks) to end with  problems of countries from eurozone periphery area. In Greece, populist party SYRIZA gains support and speaks of an earlier exit from the ECB financial assistance program, raising speculation that Greece will again face a risk of bankruptcy. Athens Stock Exchange lost a few percent during each of last few weeks, while yields on 10-year government bonds grew to over 8%. Bond prices of all peripheral countries were negatively affected and global risk aversion increased. Data from USA added to a culmination of bad news. First the series of weaker readings on Wednesday resulted in a strong sell-off on markets, and on Thursday better industrial production started to pull the markets up. Characteristic candles with long lower wick appeared on the graphs of multiple indexes which marks the retreat sessions. Friday's data from the United States were not bad and the markets followed the trend, continuing increases also in the last trading day.

In Warsaw large companies retreated. As a result the WIG20 finally rose from its knees and thanks to the good end of the week has grown by a total of 0.36%. Small companies WIG250 ended the week lower by 0.26%. The worst performance was noted by medium-sized companies, the WIG50 declined by 1.5%. Companies of Leszek Czarnecki - Getin Bank and Getin Holding, with heavy weightings in the index returned negative results. The worst sector of the overall market was food, followed by the chemicals. Traditionally, in times of higher risk aversion energy sector was strong, despite unfavorable weather factors.

This week started very well on the capital markets. Asia noted strong growth, with the lead of Tokyo index Nikkei with nearly 4% growth. On Monday, there are no important macro readings, hence there is a good chance that good moods will remain in Europe and in the USA. Looking at the calendar for the whole week there is a number of data and events that can influence the markets. Attention should be paid to Tuesday's portion of the data from China (GDP growth for the third quarter, retail sales and industrial production for September) and Thursday PMIs from China, Germany, France and the entire euro area. If the data is not strongly disappointing it is possible to make attempts to return to growth markets. In the event of the reign of optimism we draw attention to banking sector as a candidate to rebound.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

After three weeks of downward pressure the WIG20 scored a symbolic rebound of 0.36%. However, from the weekly minimum the grow is much more powerful, and more importantly, the formation of a double peak with the extent to 2350 points was reached. After reaching this level of support index rebounded, finishing the week at 2401 points, with a clear increase in turnover during the session on Friday. Much will depend on the situation on global markets, but looking at the technical situation of the WIG 20 investors can be optimistic and predict a rebound to pre-stamped support, or the level of 2450 points.

Graph 2. PGE daily. Source: Stooq

Defensive power sector performed well in the last number of days of declines on stock markets. Looking at the chart of PGE there is one-founded fear – construction of right arm of downward RGR formation. Completion of this will actualize with the puncture of a support level at 19.80 PLN.  If that would happen, it will open the field to a decline below 17 PLN. Therefore it is very important for the bulls camp to break through the resistance level at 21.40 PLN. The next resistance is at 22 PLN. Growing turnover on grow sessions indicate that the course has the potential for further increases.

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

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