Weekly comment MM Prime TFI - April 20, 2015


For the first time in a long time, national indices have showed its strength comparing to indexes from the West. Both the broad market index and medium-sized companies’ index have reached long-term highs during the week. Blue chips were also performing well, exceeding the level of 2500 points, unobserved for many months. In Poland, the market was marked by good news from the economy. The current account balance was more than twice better than expected. The level of €116 million euro is the highest since eight months. On Wednesday, the MPC left interest rates unchanged, giving no comment on the strong appreciation of the zloty against the euro. Inflation in consumer prices was lower by 0.2 percentage points. Overseas investors complained about the negative data. Industrial production fell badly and retail sales was only slightly better. The number of applications for unemployment benefits was higher than expected and number of permits for the new homes construction was smaller than expected. 

The significant depreciation of the dollar and week ending in red by the Exchange on the Wall Street was aftermath of the weak data. The S&P500 declined by 1% the last five days of trading. The German DAX fell much worse, which 5.5% drop was the largest for over three years. The French CAC40 was performing not much better with 1.9% discount. On the other hand, the bulls have dominated the domestic exchange. The blue-chip index has grown by 0.8% and the medium-sized companies recorded slightly higher increase (1%). As a result, the broad market index rose by 0.8%, representing the third consecutive growth week on the WSE. The sWIG80 fell the worst with a fall of 0.6%.

The current week will not be full of interesting data and the most important data on Polish industrial production and retail sales will be announced on Monday. The industrial production grew by 4.9% y/y at a previous reading comparing to the 4% y/y forecast. Retail sales has been declining since three months, in turn, and the market certainly is waiting for improvement. Among the national data we should mention the unemployment rate, which will be announced at the end of the week. The data on home sales on the secondary market, the number of applications for unemployment benefits and pre-orders for durable goods in the US will be published then. The dynamics of orders for goods with economic utility exceeding three years in the previous periods was unpredictable. Summing up, the week will not be abundant in interesting readings.

Technical analysis

Graph 1. WIG20 daily. Source: Stooq

The past week has resulted in a technical breakthrough, with the strong advantage of the bulls until Friday. During the first four days of the week we have witnessed a significant resistance break in the range of 2475 - 2490 points and psychological barrier at 2500 points. The target levels were 2530 points and 2560 points in longer term. The situation has changed on Friday, when big black candle appeared on the graph, covering the whole Thursday’s growth. The objective for the next few days will be return above the level of 2475 points. Otherwise, we will see a decline by even 100 points.

Graph 2. Próchnik daily. Source: Stooq

Last week was happy to Próchnik’s investors. The company operating in apparel trading gained more than 18% during week, but it is still difficult to talk about any positive technical signals. The price approached the resistance level at 1.58 and was temporarily above the barrier and it returned to a penny below trading at the end of the week. Thus, the short-term resistance worked as downtrend line, and the price was fluctuating within its borders. The negative scenario with technical support at 1.21 PLN is still actual until the breakthrough.

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

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