Summary
Last week, despite the fact that the season on the WSE entered a hot period, it did not bring any major index changes. The largest WIG20 companies lost 0.5%, slightly smaller falls of 0.25% were recorded by small companies. Conversely, the mid-size stocks (mWIG40) gained 0.7%, so the entire WIG lost only 0.25%. The situation in Western Europe was better. Previous losses were partially recovered by DAX and CAC40, gaining 1.26% and 1.05%. This was in correlation with a break in Eurodollar growth. Earlier this was one of the factors that provoked the downturn, as the stronger euro limits the competitiveness of euro area exports. Indices in US were moving in the opposite direction - the DJIA lost 0.84% and the S&P500 went down by 0.65%. Investors do not like the activity of D. Trump, who through controversial tweets, causes a drop of some of the blue chips like Amazon. Besides, it is not entirely clear what role the United States will play in the Asian conflict. With high valuations of companies, any excuse for correction is good. However, it is doubtful for the Fed to provide it, as it should follows accommodating policy as can be read in minutes.
Polish GDP growth in the second quarter was positive (3.9% y / y) similar to employment growth in July. Slightly disappointed was data from industrial production and retail sales, however, these figures were quite solid anyway, and construction and assembly output rose by as much as 19.8%. This should be well received by the industry companies represented on the WSE. Season of results in peak, so it gets more and more interesting. Last week PGNIG presented disappointing results in trading segment. But on the other hand we can look at positive trend on copper market (KGHM) as well as JSW's performance at 10% above consensus with very good operating cash flows. Taking into account the good situation on the coking coal market, the trend of improvement in performance should be maintained. This week, the results will show, among others. Alumetal, which had previously announced profit warning, and Bank Handlowy, Astarta, Asseco, Pfleiderer, Azoty Group, Cyfrowy Polsat, Benefit.
Besides, it is worth to pay attention to some important figures - Germany will publish ZEW and Ifo indices as well PMI indices for industry and services. Similar information will be given to France and the euro area as a whole. However, if something is to change the situation on the indices then it is most probable to point to a symposium at Jackson Hole, which starts on Thursday and will last for the weekend. It is a signal that holidays are ending, so we expect that the uncertainty in the indices will soon be clear.
Technical analysis
Graph 1: WIG20 daily. Source: Bloomberg
The last week is unlikely to be particularly memorable for the WIG20. The volatility was low, and over the whole week WIG20 lost 0.5% with a stable volume. Technically, the picture of the market remains unchanged. The upward trend is in question, and the key to the current triangular consolidation is the key. The range of fluctuations is slowly decreasing, suggesting that the knockout is approaching. Dangerous for the upswing will be the decline of the index below support at 2300 points. At that time it is necessary to count down to as much as 2160 points, where there is another more serious support. By contrast, the buy signal will only be breaking through resistance in the form of a May peak at 2425 points.
Graph 2: Ursus daily. Source: Bloomberg
For the company of the week we chose LiveChat, which gained 5.4% on a weekly basis, with less favorable market. However, it should be noted that this increase occurred after a strong decline, so it may be a normal rebound. It is important, however, that the breakout of the long-term trend line did not lead to a drop below the psychological barrier of PLN 50. The course dynamically rebounded, albeit without any increase in volume. Nevertheless, it can be seen that demand has not yet spoken the last word and instead of going into a downward trend, it is possible to consolidate between 50 and 60 PLN.
Authors: MM Prime TFI S.A. Investment Management Team