Summary

Despite the fact that the economic data readings did not fail, the first week of February was dominated by bears – the NASDAQ decreased by 6.0%, the S&P500 fell by 3.8% and the DJI went down by 1.6%. In Europe, the stock markets ended the week in the red as well – German DAX declined by 5.2%, French CAC40 fell by 4.9% and British FTSE250 decreased by 2.9%. The latest data from Chinese economy improved the market sentiment. The industrial PMI for January, calculated by Caixin Media and Markit Economics, increased slightly to 48.4 pts. Moreover, the services PMI took off sharply to 52.4 pts. The economic data from the euro zone did not fail as well e.g. the unemployment rate fell again - it stood at 10.4%. There were also a release of data from American labor market. In regards to them, the unemployment rate in January decreased to 4.9% - it was the lowest level since 2008. On the other hand, the employment growth was lower than expected. The market could have been confused. Nevertheless, the declines of oil price seemed to be more important. Oil producers had no reason to be satisfied – the price of black gold fell to 31 dollars per barrel again. Furthermore, there were not any circumstances which could cause a trend reversal. In Europe, Mario Draghi stated that the ECB still had plenty of instruments that can be used to stimulate inflation in the euro zone. Therefore, it is possible that the next ECB’s council meeting (the 10th of March) will bring some dovish changes.

This time Polish indices did not take a leaf from European and American stock markets. It was third consecutive week in which the WIG20 ended the week in green – it increased by 0.6%. Small and medium – sized companies did not fail as well. The mWIG40 took off by 1.9% and the sWIG80 went up by 0.1%. Investors learnt the industrial PMI. It fell from 52.1 pts. in December 2015 to 50.9 pts. in January. Nevertheless, the icing on the cake was the MPC meeting. The council did not change interest rates. Furthermore, in regards to the statements which were made by new board members it was believed that the monetary policy would not be changed in a short - term. However, it seemed that the market tone improved. On the other hand, there was still a political risk that had been a main source of the bear market on the WSE.

A current week will bring a lot of economic data readings from European economies. Investors will focus on readings of GDP growth and industrial production in the euro zone. In the US, there will be a publication of the retail sales. In Poland, investors will learn the CPI and the dynamic of the GDP in the fourth quarter of 2015.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq.

After the first part of the week, in which the WIG20 declined, the index of the largest companies recovered. At the end of the week it stood at 1,790 pts. Thus, the index broke the resistance of 1,783 pts. and approached the line of accelerated downward trend. The RSI oscillator was in an upward trend and did not indicate any signals. Nevertheless, the last candle was the spinning top. It was a signal of indecision. Therefore, current week will be crucial. If the WIG20 breaks the resistance line and the psychological level of 1,800 pts., the index will probably move towards north. Otherwise, a correction can be expected.

Graph 2: Bank Handlowy in Warsaw daily. Source: Stooq.

This time we chose Bank Handlowy in Warsaw as a company of the week. The share price of the bank was in a short – term upward trend. After the breakthrough of the PLN 75 mark, a movement towards the line of accelerated downward trend can be expected. It can be a first signal of a long – term trend reversal. However, the RSI oscillator grew rapidly and it may indicate a sell signal soon. Therefore, it is possible, that the next resistance will be too strong to break.

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

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