WIG20 breaks key supports, KGHM and Orlen weighed down by falling commodities
From the end-of-session perspective, it is clear that the market operated within the context of an almost perfect decline mix, comprising base market discounts, commodity price falls led by key metals, and the weakness of the zloty linked to the strengthening of the dollar against competitors.
Locally, the PLN/USD relationship and the correlation of WIG20 with the zloty’s condition were particularly important.
Supply was also supported by a 2.7 percent drop in copper, which resulted in a 6.9 percent discount for KGHM, and the weakness of oil, which put pressure on Orlen shares.
In essence, PKN was overvalued along with the commodity by 4.8 percent. The market’s breathing space was adequate for the main averages’ declines, and in WIG20 16 companies were overvalued with only 4 rising, while across the entire market 56 percent of companies fell, 33 percent rose, and 11 percent remained unchanged.
The decline in Warsaw would probably have been larger if not for the morning attempt to rebound on Wall Street and the slight correction of the zloty’s weakness at the time the GPW was preparing to close the session.
Regardless, the spread confirms WIG20’s sensitivity to the behavior of base markets, broadly understood from stocks to commodities to currencies. Technically, Wednesday ended with WIG20 breaking through the supports defended yesterday in the 3600-3570 point zone and only partially realizing the invitation to test the psychological and technical barrier of 3500 points.
Considering the market’s sensitivity to base market conditions, it should be assumed that the trough of the observed retracement will be dictated by the fading of corrective impulses in an environment that tomorrow will need to account for in prices, with particularly important readings from U.S. PCE inflation and the estimated U.S. GDP dynamics.
