Summary

In the past week, not macro data but a symposium in Jackson Hole was the most important event of the week, or even whole month. The culminating point was the occurrence of Fed boss J. Yellen, which caused high volatility and strong fall on EURUSD. In the case of stock markets, a high response was not observed. Europe's most important stock exchanges on Friday ended the session in positive territory, whereby Wall Street noted only a mild decline. In her statement, Yellen drew primarily phrases about good economic situation in the US – good enough to think about another interest rate hike. On the other hand, another member of FED government Fed, J. Powell fears inflation quickly reaching 2%. According to S. Fisher the data is strong, but vague and there may be few scenarios of monetary policy in following months.

This week correction move was present across Atlantic see – the S&P500 lost 0.6% and the DJIA decreased by 0.8%. In Europe, light green – the DAX was up 0.56%, and the CAC40 increased by 1%. Theoretically the WIG preserved neutral position, index fell by 0.1%, but it was a move made again by large companies – the WIG20 fell by 1.33%. On the other hand broad market continued bull rally. Led by medium-sized companies from mWIG40, this time a weekly increase was 2%. Chased by small companies - sWIG80 grew by 1.5%. The star of last week was CD Projekt - games developer positively surprised with the results, and future plans outlined at the conference after the results also appealed to investors. Share price broke another psychological barrier, and is already above 40 PLN. The upward trend continued after the results publication of Uniwheeels. After a full understanding of Grajewo report market started buying the paper, the effect of which is a breakthrough of record levels from 2013 and 2014.

It is possible that the potential change of attitude on the Fed cuts (although indicated in the following statements from several days) will be played at the beginning of the current week. So far optimism is seen in Asia, where the Nikkei is up by more than 2%. Investors are mentally focused on interest rate hikes and developed markets will not be affected. Situation in emerging markets, including the Warsaw Stock Exchange may look worse. Polish zloty has reacted negatively. Weak macro data and tight budget draft for 2017, with a considerable risk of exceeding the 3% of GDP deficit were the main factors. This week we have a lot of data - European PMIs for the industry, ISM from the US, but the investor’s activity will be the biggest on Friday, when it August data on employment change in the US will be announced.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

The WIG20 noted another downward week and its technical situation is becoming increasingly difficult. A previously generated buy signal slowly ceases to be active. A downward correction have already caused a decline below the downtrend line. It is true that it is built on a small volume, but it can also be interpreted negatively - as a lack of interest in Polish large companies. If drops will follow baseline scenario for the upcoming weeks will become a test of support at 1,640 points. To talk about the possibility of increases the index must deal with resistance at 1880 points.

Graph 2: CD Projekt daily. Source: Stooq

For the company of the week we chose a computer games developer CD Projekt. After the publication of the results stock ended last week with an increase of 12.6%, setting a new all-time high at levels above 40 PLN. Importantly, the appreciation of the stock followed a volume booster, confirming the non-randomness of motion. The upward trend is very clear, but the distance from the line of this trend is already considerable. Combination of above with buyout on the oscillator RSI can lead to a correction. The key support is an already broken high of 35.45 PLN. However it is possible that the correction will take a mild form of consolidation at 40 PLN.

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

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