Summary

During the last week stock across the globe rebounded from declines noted in July and August. Poor PMI readings from main European economies didn’t dispirit bullish investors. European industrial PMIs turned out to be worse than expected and lower than a month earlier. France was one of the main losers last week. Despite good industrial production indicator released earlier this month French economy is still experiencing a progressive slowdown. Again European economy is being pulled along by Germany. In Asia, Japan showed stronger PMI than China, which still struggles to achieve a stable growth path. U.S. markets not only touched historical peaks but performed exceptionally well throughout the whole week. There was a lot of speculation prior to Friday’s Janet Yellen conference in Jackson Hole, but she didn’t announce anything that would surprise markets. That is the reason why last Friday's trading hours passed peacefully. The balance of the week is an increase of 2.5% of the DAX, the CAC40 up by 1.6%. The S&P500 rose by 2.8% and the Shanghai index by 1.8%.

Warsaw Stock Exchange took part in the global rebound. Mixed data of July industrial production did not necessarily contributed to the advance on WSE. It turned out that we mine less coal and build almost as much as a year ago. Fortunately export industries increase production. In this context, we enjoy not bad PMI reading for Germany, our main trading partner. There is a rumor about a possibility of circumventing Russian sanctions through Belarus, which is likely to avoid the worst scenario for the Polish economy. Major stock indices recorded increases. Finally small and medium-sized companies over-performed large ones. This might be a game changer for this highly underrated segment. The WIG250 and the WIG50 grew for approx. 1.5%, while the WIG30 by 0.7%. Another company provided financial results for the second quarter. GTC and Lotos surprised negatively while Robyg showed good results. On the other hand, Redan surprised investors by providing details of the sale of part of the Textilmarket shares with a huge premium over the current market cap.

Short term perspectives for the Polish stock market are not the best. We have approached the levels of which we have already bounced back several times. Similarly, the stock market in the USA usually need some rest after beating new records. The main fundamental threat to growth: weakness of the European economy and Ukraine conflict fueled by the Russians is still present. On the other hand, strong growth often start for no apparent reason, which is only revealed later. The most important next week's data from Poland will be Tuesday's retail sales and unemployment rate.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

Last week was not as successful for the WIG20 as the previous one. The index approached strong resistance zone – with support levels at 2485, 2500 and 2530 points. Certainly the breakthrough will be a challenge and would also open the way for an attack on levels above 2600 pts. From technical point of view, the situation looks quite good. In the phase of last week's consolidation turnover significantly decreased. This suggests building a base for further growth. Any drop below 2400 pts will strongly complicate the situation and negate growth scenario.

Graph 2. Energa daily Source: Stooq

Overcoming historic highs and the continuation of stable growth trend led Energa to be chosen as our stock of the week. Price willingly broke the resistance at 21.88 PLN, which now is the closest support. Slightly disturbing is a lack of increase in turnover levels and bear divergence on the RSI oscillator. Although the company is in an uptrend, it can be a false breakout. This week should be the key week for the stock. Rebound from 21.88 upwards will signal the healthy structure of the upward movement. However, if this support is broken, the shares of the company may enter into a further phase of consolidation, limited with support at
19.50 PLN.

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

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