Weekly comment MM Prime TFI - June 20, 2016


Last week major stock indices liked the red color. During the whole week French CAC40 declined by 2.6%, British FTSE250 deteriorated by 2.4% and German DAX fell by 2.1%. In the US, the NASDAQ went down by 1.9%, the S&P500 slipped by 1.2% and the DJI decreased by 1.1%. The global stock exchanges were filled with fear because of a high probability of Brexit. As a result, the market sentiment was bearish. Nonetheless, Sunday’s polls showed that the supporters of Bremain gained a slight advantage. Last week there was a meeting of the FOMC as well. The interest rates remained unchanged. During the conference Janet Yellen did not signal a possible interest rates raise. Lately, the market expected that the monetary policy would be tightened in July. Nevertheless, the Fed’s meeting did not significantly affect the market which was focused on the information from the UK. What is more, investors learnt some new economic data. In the US, there were publications of the dynamics of the industrial production (1.4% y/y) and the retail sales (2.5% y/y). This data was released by China as well. The readings were in line with market expectations - the growth rate of the industrial production stood at 6% y/y and the dynamic of the retail sales amounted to 10% y/y. In addition, it is worth paying attention to the data from the Eurozone. The CPI stood at -0.1% y/y, while the industrial production grew by 2% y/y.

The market sentiment on the WSE was bearish as well. The WIG20 deteriorated by 1.6%, the mWIG40 decreased by 1.7% and the sWIG80 went down by 3.2%. The concerns on Brexit caused that the Polish assets lost their investing attractiveness, especially in the eyes of foreign investors. To add insult to injury, the latest data from the Polish economy was not a support for the stock indices. The dynamic of the retail sales stood at 2.2% y/y in May vs 3.2% in the previous month and the industrial production grew by 3.5% y/y (in the past month there was an increase of 6%). On the other hand, the reading of the CPI surprised positively. The index stood at -0.9% vs -1% expected.

Thursday’s referendum in the Great Britain will be the event of the week. However, it is also worth paying attention to the public appearances of the presidents of the ECB and the Fed. On Tuesday, Mario Draghi is speaking at the European Parliament and Janet Yellen is presenting a monetary policy report. Investors will also learn some data from the US – the leading indicators index and the dynamic of the durable goods orders. In Europe, there will be publications of the ZEW indices and the PMIs. Furthermore, there will be releases of the German Ifo index and the Polish unemployment rate.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

In the first part of the week the WIG20 stabilized. However, Thursday brought significant declines. These were caused by the latest polls concerning Brexit. Nonetheless, the market sentiment improved on Friday. Thus, the blue – chip index recovered and ended last week at 1,754 pts.. The RSI oscillator remained neutral. It is worth noting that the WIG20 approached this year’s low peak (1,657 pts.). Before the index of the largest companies bottoms out, it has to break the nearest support which stands at 1,700 pts.. On the other hand, the nearest resistance stands at 1,800 pts.

Graph 2: Helio daily. Source: Stooq

This time we chose Helio as ‘stock of the week’. During the whole week, the share price increased by 43%. The course broke the line of the long – term downward trend. The dominance of bulls was confirmed by high level of trading volume. Moreover, the moving averages formed a golden cross pattern and the MACD oscillator shown a buy signal. Therefore, the prospects seem to be very promising. The nearest resistance stands at the psychological level of PLN 6. On the other hand, the RSI oscillator indicated an overbought, so before the next upward wave a correction can be expected.

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

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