OMXS30 – investors on buy hold?

OMXS30 – investors on buy hold?

24. elokuuta 2017 Autor Tradingportalen

Last week OMXS30 showed signs of potential weakness when the stock index passed support area around 1535-1540. Next technical support level to keep an eye on is around 1524, even if there is an even more significant support level awaiting at around 1500. Potential sign of strength could arise if the index would start to move higher, specifically if the index would pass resistance levels around 1532, 1535, 1560, 1583 and around 1600. Volume pattern is more carefully watched now, in order to find strength or weakness in such a move. Long term trends are believed to show signs of potential weakness, and volume patterns are still negative. As long as there is a weakness from buyers, we are keeping a closer eye on the significant technical support level around 1500.

Last week Nasdaq OMX moved up and down, but finally closed and settled the week with a slight loss. Swedish stock index OMXS30 fell -0.4 percent when it closed the week at 1532.12. Since the beginning of the year, the index is up +1.0 percent, and +4.2 percent adjusted for dividends.

Beginning of last week OMXS30 traded as high as 1560.5, after market worries eased around the dispute between U.S and North Korea.

In Sweden macro statistic showed KPIF increased +2.5 percent year on year, which was first time the inflation was over 2 percent since back in 2010.

Swedish interest rates and currency strengthened, which caused the market to move lower. This occurs as the strength in the Swedish currency causes the competitiveness for Swedish companies, product and services to decrease.

Within OMXS30 the big index heavy banks gained along the rate gains. Swedish banks are benefited as they make more money when the interest rate would leave current negative and zero rate levels. After the soft Fed-protocol on Wednesday evening, the move was erased.

After a week of political turbulence in the U.S, the president Donald Trump decided to cancel the advisory group with a number of high level executives. This has further added on to the fire of worries in the market, if he will be able to proceed with the previously announced tax reduction and heavy investment in infrastructure.

Besides causing a negative effect on the state of the market, this has clearly been showed on OMXS30-company Skanska. Skanska is doing a lot of business in the U.S, and has already wiped out 22.5 percent of the market value since the top on 3 February at 229.7.

The long-term trend for OMXS30 is showing more and more signs of potential weakness. The direction of the MA 200 is still positive, but as the stock index is moving lower, the more this significant moving average will start to fold.

The short-term trend 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 which we define as the direction of the 20-day moving average, has been negative since the middle of July.

OMXS30 has also been starting to show lower highs and lows, which is considered to be negative. The volume pattern is also showing more strength when the market is moving lower, which is believed to be sign of potential underlying weakness, based on a long-term view.

Weekly chart of the OMXS30 between the 16th of January 2017 and the 18th of August 2017                         source: Aktiespararna

Looking at specific index- and stock chart, it is looking more like buyers are on hold. There are probably several reasons why this might be, one reason could be that central banks are starting to tighten up stimulus.

During summer,OMXS30 showed clear signs of weakness. This was specifically seen when the index moved below support level around 1600, during higher market activity. Last week the index showed further potential sign of weakness, when the index passed support levels around 1535-1540.

We highlight this, because if the market is about to enter a longer period of time with weakness, the index is very likely to experience a few days of smaller gains. This is not uncommonly causing short term investors to take action to cover short positions, whereas short-term investors quickly act on smaller gains.

Long-term investors who buy the market consider this a problem, as the market move during a period of low volume is quickly dropping again, once they stop buying.

Therefor the market activity is extra important to keep an eye on during market gains. So far, the volume patterns are showing signs of weakness.

The only thing we consider to be positive, is that OMXS30 is oversold. Stochastic indicator is still on very low levels. The indicator has also not made any lower lows when the stock index OMXS30 did. This is a positive divergence between the indicator and the stock index OMXS30, as once the index shows signs of potential weakness it would be considered to be more attractive, especially during increased market activity.

OMXS30 will, however potentially trigger weakness if support level around 1524 would break. In such a case, we keep a close eye on support area around 1500.

In our hourly chart below, OMXS30 could potentially trigger strength if technical resistance around 1532 and around 1535 is passed. Right above these price levels further resistance on a negative trendline, currently located at 1546, and around 1548 and around 1556 could be a gap to close.

Even in this short-term time perspective, the most significant resistance levels are located around 1560 and around 1583.

Daily chart of the OMXS30 between the 31th of July 2017 and the 18th of August 2017                              source: Aktiespararna

Short-term investors are believed to keep a close eye on resistance levels around 1532, and around 1535.

The market can, however, always quickly change. Keep a close look at volume patterns, as any signs of further potential weakness or strength might be a guideline for any upcoming move.

Weekly chart of the OMXS30 between the 17th of August 2012 and the 18th of August 2017                             source: Aktiespararna

 

 

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19.7.2019 17:23:59