WEEKLY COMMENT MM PRIME TFI S.A. - March 9, 2015
Surprising scale of interest rates’ reduction was the crucial event of the week for the Warsaw indices. Cut made by the MPC amounted to 50 basis points, which is twice more than the market consensus. Combining with Monday’s and Tuesday’s decrease, Wednesday’s growth impulse was quite significant. Bullish technical scenario was realised on blue chips the following days, in contrast to the stock exchange medium-sized companies. Here we witnessed a break of very important technical resistance, which opens the way for a much higher levels. The great streak was continued by the index of the smallest companies, which unusually fell weaker than the mWIG40 due to the Friday’s drop. The DAX gains because of good moods related to quantitative easing. The German index has reached another consecutive peaks, suggesting the possibility of the correction in the near future. This, in turn, whereas the strength of the national indices, would result in continuation of the Warsaw Stock Exchange’s weakness. For the first time in a long time, we are witnessing correction on Wall Street, although the S&P500 is still profitable since the beginning of the year. Mixed feelings were associated with American data at the end of the week. Non-farm payrolls rose by as much as 295,000 and levelled the previous revision. In contrast, the number of applications for unemployment benefits was high.
Finally, the German DAX grew most strongly last week. However, increase amounted to only 1.3%, which confirm the low volatility on global exchanges. For example, the French CAC40 remained close to the level from the previous week. A decrease of 0.9% was on the WIG20, which traditionally fell out worse than SMEs. The best were medium-sized companies from the mWIG40 with the appreciation of 2.3%. This time, a slightly lower grow (1.5%) was on small companies’ index. The S&P500 decreased by 1.6%.
Current week will not bring important data for the markets. The first data from overseas will be announced on Thursday. Retail sales and retail sales excluding cars will be crucial, with previous forecasts worse than the real data. More information will be announced on Friday. This will include Polish CPI inflation and PPI inflation from the United States. The data on a monthly basis was lower than expected in both cases last month. We will look at slightly less important data from Poland and USA this. Information about the money supply in the broadest sense and the University of Michigan preliminary index will be given. Evaluation of the potential purchasing power of US consumers in the previous month for the first time in many months was weaker than expected.
Graph 1. WIG20 daily. Source: Stooq
The beginning of March does not look favourably for the bulls on largest companies’ chart. We witnessed a retreat from the downtrend line visible on the chart on Monday and Thursday. Attempt to realize bullish scenario was noticeable in two consecutive days, but the demand signal was denied by Friday’s candle. Currently, we are witnessing fight with the resistance in the form of mentioned line in the vicinity of 2375 points. Rebound from it will herald testing the nearest short-term support at 2,307 points. Potential range of growth is around 2415 points in a positive scenario.
Graph 2. Mostostal Warszawa daily. Source: Stooq
In the last few days, a very strong short-term upward trend was noticeable on Mostostal Warszawa’s chart. Significant increases lasting from the end of February has changed price from 6.70 to 9.24. This result in occurrence of a number of positive technical signals, such as breaking the resistance at 7.54 with increasing volume. The target growth range is up to 11.10, but technical correction’s signals, among others, are currently overbought RSI and Williams% R indicators.
Authors: MM Prime TFI S.A. Investment Management Team
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