The WIG20 index reached a new bull market high of 3830 points on Wednesday but closed lower, highlighting the difficulty of sustaining momentum just 3.5% below the all-time record of 3940 points from 2007. Investors are watching closely whether the index can finally break the 19-year-old barrier.
Wednesday’s session saw the WIG20 improve on Tuesday’s record, rising intraday to 3830 points before reversing to close at 3803 points, down 0.4% on the day. The index held above the psychological 3800 level, which analysts view as crucial for the near-term outlook.
The rally has been driven by falling US inflation, with CPI dropping to 3.5% year-on-year from 4.2% in May. This strengthened expectations that the Federal Reserve will pause its rate hiking cycle, boosting appetite for emerging market assets and weakening the US dollar.
Three and a half percent to history
Adam Stańczak, an analyst at DM BOŚ, described the session as a consolidation of the breakout above 3800 points. – Psychological levels will now serve as technical barriers, with 3900 being the first and 4000 points entering the radar – he said. – The session is a warning that the dynamics of recent gains and the market’s sensitivity to round levels make a stop and longer consolidation around 3800 points plausible.
To surpass the all-time record of 3940 points from 2007, the index needs to gain just over 3.5% from Wednesday’s close. The record has stood for 19 years and has been tested several times during past bull markets, only to repel further advances.
– New records above June highs mean the index has reached its highest closing level since July 2007 – said Jacek Borawski from Noble Securities. – Sell signals are still absent, and the moving average setup remains characteristic of a not very strong uptrend. This does not mean the end of the upward move but warns that the probability of a correction is increasing.
Banks step back, other sectors step up
A notable feature of the current rally is the underperformance of the banking sector, which has been the main driver of the bull market. WIG-Banks lost over 1% on both Tuesday and Wednesday, even as the broader index set new records. Over the past year, the banking index has gained 50%, and over two years, 80%.
The fact that WIG20 is making progress despite bank weakness suggests the rally is broadening to other sectors. The mid-cap mWIG40 index closed at a new all-time high of 10,034 points, while the small-cap sWIG80 continues to lag, having peaked in late May.
Geopolitical tensions in the Strait of Hormuz and a 15% surge in oil prices over the past 10 days are being largely ignored by equity investors. – The market’s sensitivity to Middle East tensions is decreasing – noted Stańczak, suggesting that macroeconomic factors remain the primary focus.
Whether the WIG20 can finally break through the 3940 barrier depends on sustained buying momentum and continued favorable macroeconomic data. The market has shown it can reach new highs, but holding them remains the greater challenge.
Źródło: wnp.pl, Fot. Kamil Zajączkowski / Shutterstock
