OMXS30 in dubious position…

OMXS30 in dubious position…

11 July 2017 from Tradingportalen

OMXS30 is currently in a dubious position. Long-term the stock index could still be indicating signs of positivity. A bit more short-term the index has been consolidating for the last couple of months. Important technical support levels are located around 1600, as well as resistance around 1657. Should the index find ground above 1657, during stronger trading activity, this could very well be the strength we are looking for in order to move higher. However, if the index would move below 1600 during high trading activity, this could question our positivity. It is not uncommon that July is a month of strength, and company earnings could be strong. The volume pattern, together with the weakness in the U.S dollar and long-term interest rates are however showing an increasing concern…

Last week Nasdaq OMX moved slightly higher during a week of low trading activity. Swedish stock index OMXS30 gained +0.2 percent, and closed the week at 1617.00. Since the beginning of the year, the index has gained +6.6 percent, and +9.9 percent including dividends.

Weekly chart of the OMXS30 between the 6th of July 2012 and the 7th of July 2017                              source: Aktiespararna

Market activity was low last week, due to a lot of investors are enjoying the summer holiday. The market could be also in a waiting state before this summer’s earning season, which kicks off in the middle of July.

There might be a level of positivity ahead of the earning reports. A lot of analysts believes we might get “better than expected” earning reports, which is a little bit of a contradiction, because why are not more investors buying more since a lot of OMXS30 stocks has moved lower from their yearly highs.

Besides the uncertainty of the earnings reports, the weakness in the U.S dollar, and the fact that central banks are a bit more bearish complicates the whole story.

The quantitative easing from central banks has stabilized the economy as well as pushed the international stock markets higher the last few years. This has also been one of the positive contributions to why the market shakes off negative news relatively fast. Once the central banks will stop fueling the market with quantitative easing, any negative news that might cause a short dip today, could move significantly more in the future.

Long-term interest rates have started to gain strength. If this continued, a lot of investors would be more likely to consider investing in the bond market, in favor of the stock market.

Currently the long-term trend for OMXS30 is considered to be positive. The 200-day moving average, which is currently located around 1547 is showing positivity, and OMXS30 is showing long-term patterns of higher highs and lows.

Daily chart of the OMXS30 between the 2nd of February 2017 and the 7th of July 2017                              source: Aktiespararna

The volume pattern however, OMXS30 might be patiently consolidating. This could potentially be a sign of an upcoming breakout. We might get a positive breakout, as well as a negative breakout.

Based on a more short-term perspective, the long-term positive view to get even further fuel, the index would have to find ground above technical resistance level at around 1657. In this case we could, if the momentum is in our favor, potentially experience a move towards previous all-time high around 1720.

Should OMXS30 find ground above technical resistance around 1657 during an increasing volume, this could be a potential sign of further gain. In this case we could potentially be looking at a move towards previous all-time high around 1720.

However, if the stock index would start moving lower and find ground below 1600 during relatively high turnover, this could instead be a potential sign of further weakness. If this was the case, technical support levels would be awaiting around 1585, and if we would see a move below this price level, we might be looking at a test of support area around 1540-1550.

Stochastic-indicator triggered a potential sign of strength last week. This happened when the indicator moved from a low and oversold territory, along with the largest intraday gain OMXS30 had last 2 months. Last Monday the index gained +1.6 percent, during a turnover of around 12.9 billion.

Hourly chart of the OMXS30 between the 19th of February 2017 and the 7th of July 2017                              source: Aktiespararna

Taking a closer look at the consolidation-area between 1600 and around 1657, we could see potential signs of strength if the index finds ground above 1622, 1630 and around 1645.

On the other hand, there could be short-term technical support levels awaiting at around 1610, 1602 and around 1600.

Should the stock index find ground above 1657, this could potentially be the positive sign we are looking for, in order for the index to move towards all time high around 1720.

In order to question our underlying positive view, OMXS30 would not only have to move below 1600, but would find ground below this price level during a time where the market turnover is considerably large.

 

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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

 

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01/02/2023 13:59:48