The report season is driving the market
The report season has started. Last week, 23 companies in
the S&P 500 index reported their Q4 results (or correspondingly). Thus, the
total number of companies that have reported is now up to 44. It was the
banking and finance sector that dominated last week with six major banks and
investment banks reporting. Overall, 70 per cent of the companies have topped
expectations on the profit side so far, where Banking and Finance is at 63 per
cent and Industrial is at a 56 per cent. Notably, two out of three companies in
the industrial segment have delivered weaker revenue than expected. Industry,
together with technology, is the most cyclical sectors.
A summary of last week's reports is shown below:
Historically a setback often comes just before or in the
beginning of the reporting season, but this has not been the case so far. Also,
stocks tend to move upwards as the reporting season has been going on for a
couple of weeks. It still remains to be seen how it turns out this time.
In any case, the reporting season in the US has so far had a
strong start. In addition, last week the Fed also resumed buying government
backed securities in the market, giving the continued a boost to stock
valuation:
For two days in a row the intraday move has been looking
pretty much the same: S&P 500 gapped up, trading continued during the day
in a sideways move to finish off the trading day with a push upwards. In other
words, it looks like the computers are executing a large client order right
now. The trend is still rising and is moving into levels where the air is thin:
Below is the daily graph for S&P 500. As can be seen,
the index is trading well above the rising EMA9 as well as MA20 acting as
support on the downside.
RSI is at overbought levels. This is not a sell-signal on
its own. Thus, the RSI can be overbought for some time to come. The Fed and the
report season are likely to drive the market, up or down.
The tech heavy Nasdaq 100 is moving straight upwards:
As for S&P 500, the RSI-indicator is at overbought
levels. The upwards sloping EMA9 and MA20 function as support on the downside.
However, one should never forget the large economy in the
east, China. All macro data indicate that Chinese economy should slow down
quite significantly. On Friday, the Chinese GDP figure came in at a growth rate
corresponding to 6.1 percent, which also is a considerable slowdown. The
slowdown would probably have been even more clear if the Chinese authorities
had chosen to show the correct figures. However, the market is aware of that
the numbers from China usually are fishy/manipulated to a certain extent.
Below shows the GDP-growth for the Chinese economy. As can
be seen, China's GDP growth has been on a sloping curve since 2007. Note,
however, that it is one of the world's largest countries and with figures that
put almost all other countries on the sideline:
China’s Shanghai Stock Exchange Index (SSEC) has also been
lagging other large western stock indices the last few days. Shanghai is a
well-studied retail market that is governed by speculative trading, which can
provide fast and unmotivated price swings. From time to time funds operated by
the government step in and drive the market in a specific direction and it does
not always have to be upwards.
The question is whether the recent price hike in SSEC has
taken place to create a better trade negotiating position for the country with
Donald Trump? And now that Phase 1 of the trade agreement has been signed, the share
prices fall again:
This is a development that should be kept under close watch
as SSEC has a tendency to guide other stock exchanges with 6-12 months of
legislation. Also not how closely connected Shanghai is with Sweden’s OMXS30:
OMXS30 shown in the graph below has been consolidating and
thus lagging S&P 500. On Friday the index did however manage to break away.
MACD has generated a weak buy signal and EMA9 is once again upwards sloping:
A resistance level is close in sight, but company reports is
likely to drive the market. Among the OMXS30-companies, Sandvik and Ericsson
will release their reports this week.
The German DAX index has also lagged S&P 500. Even
though the strong ending of the week, the index did not manage to break above
its previous high from early January. See graph below:
The shorter trend is nevertheless upwards sloping and report
season is likely to drive the German market as well.
Time for Boliden to test
previous top
Swedish Boliden will release its Q4 first on February 13.
The share broke above Fib 23.6 on Friday with an attempt to test the SEK 265.5-level
but without success:
EMA9 has turned upwards sloping and MACD has generated a buy
signal. In case of a break above this level the upside to the SEK 287.5-level
is appealing. On the downside, Fib 23.6 at SEK 258 serves as support.
Further upside in Swedbank
The Swedbank share managed to close above Fib 61.8 as well
as falling MA200 on Friday. As can be seen in the graph below, some upside
still exists in the share:
The resistance level is made more visible in the weekly
graph below:
Additional worth noticing from the weekly graph is the
positive divergence between the share price and MACD.
Scary formation in EUR/USD
A scary bearish head-and-sholder
formation can be found in the EUR/USD. A break below the neckline at 1.1 calls
for furth downside:
Support can be found at the
1.1-level.