Summary

Despite modest economic calendar, which theoretically translates to lack of incentives to serious movements in the stock markets, last week was not as boring as it was expected. On most stock markets, including the Warsaw Stock Exchange, supply prevailed over demand, which resulted in major indices drop over the week. In Polanddeclines were not, as usual ,the consequence of collapsing under its own weight, because they were accompanied by higher than usual turnover (probably supported by foreign capital). In this case, there is an increasing chance that in the nearest future turning point and awaited rebound on WSE will become a reality. In the last five sessions the WIG lost 2.9% and finished the week below 52,000 points. The WIG20, with weighing banking sector, which for a long time has been an underdog with investors and which constitutes nearly 35% share in the index, during last week lost 3.7%. The WIG20 went down to the lowest levels since September 2013. The mWIG40 and the sWIG80 lost as much as 0.9% and 0.2% respectively. Last week was not successful for the main European stock markets as well. Since the beginning of the week the DAX lost 1.4%, the FTSE250 fell by 0.6%, while the CAC40 closed the week with a loss of 0.8%. Regarding the macroeconomic publications from European economies, in the last week most worthwhile data were the preliminary PMIs for french, german and the euro zone economies, which unfortunately, in each case, were weaker than expected.

Major indices in the US also recorded downward week. The most important publications from the US economy, which were better than the consensus, were preliminary reading of the PMI for the industry and the lowest in 40 years number of weekly initial jobless claims in the week ended 19th July (another factor prompting the Fed to raise interest rates later this year). The S&P500 lost 2.2% and once again conducted a failed assault on the historic peak. The NASDAQ, like week before, set a new historic peak, but during entire week lost 2.3%. The DJIA lost, as many as 2.9%.

A lot has happened in commodity markets, especially on gold, where we had a big sell-off. Gold futures contracts fell to new, unseen for several years, lows below $ 1,100. At this point, gold is the cheapest since 2010.
This week also will not be rich in macroeconomic data. It is worth paying attention to the publication of the German institute Ifo index and Chicago PMI index, as well as preliminary PMI for services and GDP for the second quarter in the United States and the CPI inflation in Germany. It is worth remembering that this week the FOMC has a meeting.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

Unfortunately, the past week was not successful for the Polish blue-chip index. The WIG20 during the entire week lost 4.3% and was at the lowest levels since September 2013. During Wednesday's session, when the index had the largest drop (-2.8%), bears coped with the support which was the hole from 16th of January at the level of 2225 points. In the next days supply was able to push the index below 2200 points, making a new bottom of the current downward trend at 2170 points. The WIG20 ended the week reaching a value of 2187 points , in the area of subsequent support level which is the hole from 5th of September 2013 at 2166 points.

Graph 2. PKN Orlen daily. Source: Stooq

One of the most interesting shares in the past week were those of the PKN Orlen. Due to high expectations concerning the financial reports for the second quarter (published on Thursday) during the first days of the week the share price was growing very vigorously. On Monday there was an upward break of monthly consolidation. On Wednesday the course reached a new historic peak at 79.55 PLN. After the publication, there was a profit taking, but on Friday the share price again began to grow. Since the beginning of the week the shares gained 6% and there is nothing to prevent from further growth.

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

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