OMXS30 shows negative tendencies?

OMXS30 shows negative tendencies?

15 August 2017 from Tradingportalen

Last week OMXS30 broke technical support levels at 1548 and around 1540. Despite the negative move, the index moved lower during a time of low volume, and the index is now technically oversold. Any positive news might cause the index to move above technical resistance levels at around 1548 and around 1583. Based on a longer timeframe the index is showing signs of possible negative tendencies. Volume patterns are still negative, and support level at around 1535 is not too distant. Sentimental technical support levels await around 1500 on the lower side, as well as around resistance on top at 1600. Technical resistance is also located at around 1657.

Nasdaq OMX moved lower last week, during a week of relatively low trading volume. OMXS30 index fell -2.2 percent, and closed the week at 1538.96. Since the beginning of the year, OMXS30 has gained +1.4 percent, including dividends the gain is slightly more at +4.6 percent.

During the week focus was around USA and North Korea, which set the state of the market. U.S president Donald Trump warned for “rage and fire” against North Korea, and followed up with a statement that it maybe was not harsh enough. Trump seems to think that it is a business negotiation, where the strongest comes out as the winner. Let us hope that, against all odds, it will be a successful tactic.

There is a risk that the negotiations will cause uncertainty on the financial market, if the battle continues.

North Korea will most likely not toss in the towel, the regime is dependent for survival on nuclear weapons, since U.S and its allies would sooner or later cause the regime to fall.

Possibly Trumps actions could cause China to interact, to dampen North Koreas aggressive tone. Chinese communist party wants the regime to stay, as a buffer between China and the U.S supported South Korea. If the regime falls, China would get a neighbor which is supported by the U.S, which is far from desired.

Financial markets have sadly been forced to accept horrible terrorist attacks. The lesson is that despite the horrific actions, the market is not affected long term. However, a nuclear war would surely be uncharted territory, and the question is more what it could mean. Trading paralysis would be one thing, long term investors, which are the ones who should buy stocks during time when the market starts to fall.

There is also a dampened sentiment over the market. Central banks have commented about a tighter stimulus. This is also negative from a point of view when it comes to ability to act from long-term investors.

On top of this, warnings have yet again come up when it comes to the debt ceiling in the U.S, which could be reached as early as later this year. Unless the U.S congress raises the debt ceiling, U.S would be forced to “close down public offices and cancel payments”. Maybe this will never happen, but at least it is a possible negative trigger, in an already worried state in the market.

It would not hurt, if political ties suddenly converge and shake of any worries, or possibly companies’ profits start to accelerate unexpected in a positive way. Right now, the probability for this is far from crystal clear.

The long-term trend for OMXS30 has also started to go to a more neutral or negative position. The 200-day moving average still has a positive indication, but OMXS30 is now trading below this moving average. The long-term pattern of higher highs and lows is also broken.

In our weekly chart below,we clearly see that the positive trend was broken during summer, and OMXS30 thereafter moved below 1600 during a time with significant volume. On top of this, OMXS30 has also moved below technical support levels around 1540-1550 which enhances the weakness in the market. Next significant support level is located around 1500.

Weekly chart of the OMXS30 between the 20th of March 2015 and the 11th of August 2017                               source: Aktiespararna

Stochastic indicator in both the weekly and daily chart is currently in low or oversold levels. This could also be another backbone, if the market gets positive news that the index could bounce back in a positive state. When the index moved lower the last time, the trading volume was also relatively low, which is positive.

OMXS30 showed signs of possible negative tendencies during last week, and even if the index tried to move higher, it did not have strength enough to pass technical resistance around 1582-1585. The outburst around North Korea increased worries for investors, which caused the market to move lower. Not even the area around 200-day moving average were respected.

Daily chart of the OMXS30 between the 8th of February 2017 and the 11th of August 2017                              source: Aktiespararna

We are keeping a closer look at technical support levels around 1548 and 1540. The lower volume in the market causes these technical levels to be a bit less significant however, which means the index could easily bounce back and move higher towards technical resistance around 1548, 1583-1585 and around 1600.

Obviously, it is equally important to pay close attention to this even for short-term investors. The indication gets stronger if the higher or lower move occurs during a period when the volume is more significant.

We are looking at market turnover of around 22-25 billion per day, when it comes to a strong indication, otherwise the signal is considered as less attractive.

In our hourly chart below, OMXS30 could be a bit sensitive for a lower move if technical support level of 1535 is broken. Short-term resistance levels of around 1544, 1548 and around 1555, 1560, 1565, 1574 and 1583 is equally interesting.

Hourly chart of the OMXS30 between the 19th of July 2017 and the 11th of August 2017                              source: Aktiespararna

For the short-term investor, technical resistance levels for OMXS30 around 1544-1548 is considered a bit more interesting to pay attention to.

Long-term investors are considered to pay a bit more attention at the moment in general, as OMXS30 shows possible negative tendencies, as well as the trading volume pattern is negative.

Weekly chart of the OMXS30 between the 3rd of August 2012 and the 11th of August 2017                              source: Aktiespararna

 

 

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03/10/2022 06:17:54