OMXS30 edges closer to important support levels

OMXS30 edges closer to important support levels

21 November 2017 from Tradingportalen

OMXS30 has showed weakness on the shorter timeframes over the last couple of weeks, but as long as the support around 1600 holds, the long-term outlook is positive. The upward moving long-term trend holds true and is stubborn in its nature.

Last week the NASDAQ OMXS30 saw a downturn without much activity in the market. The large-cap index ended the week on 1617,70 points, down 1,0 percent for the week. The gains for this year are now totaling 6,6 percent, 10,4 percent including dividends.

The republicans in the house of representatives voted to pass the tax reform on Thursday of last week. The market’s reaction to this reform has so far been mild but positive. In order for this reform to be put into practice it must also be passed by the senate.

The international market climate could be dependent on this reform to be passed. This last year’s gains in the stock market, and also gains in precious metals, could be explained by the expectations the market has for this reform being passed.

Even if there should be an upside for the market if the reform should pass, there could also be a negative effect on the market should this reform be pushed to a later date, or if it doesn’t pass at all.

The markets in Sweden were relatively calm last week. H&M took a turn for the worst as the company saw itself downgraded by analysts along with separating itself from its dividends. Macro numbers from Germany might also have had an impact.

The heavily index-weighted banks were also pressed by the Swedish housing market, which have be showing signs of slowing down as of late. Morgan Stanley addressed the fact that Swedish banks have a large part of their balance sheets dedicated to this market, “which gives reason for caution against this sector”.

It’s probably less opportunity for growth along with pressed margins that the analysts are reacting to. The Swedish banks has historically had very few credit losses, even under years of crisis in 1992-1994, credits losses were contained. Losses incurred have mostly come from commercial real estate.

The Swedish banks are mostly financed on short-term foreign loans and long-term loans to its Swedish customers. Should foreign investors get spooked by the real estate market in Sweden, it could pose a problem for the banks but we are currently far away from such a scenario.

The long-term outlook for the OMXS30 has not changed much in the last week. The index remains in an upward moving trend with higher highs, and lower lows. It rests above the 40-week moving average, which is also moving north.

Weekly chart of the OMXS30                                                source: Infront

The relationship between trade and volume in this chart are not pointing to one single direction, as opposed to the daily chart. The weekly stochastic are still at technically overbought levels and are now starting to turn down.

If the OMXS30 starts to trade below 1600, and support between 1500-1580 is taken out, more weakness can be expected.

However, in the daily chart, the OMXS30 has already shown signs of weakness when the support at 1634 was taken out. The support around 1600 is important, not only because of its significance on the long-term trend line, but also because it is also here the 200-day moving average rests.

Daily chart of the OMXS30                              source: Infront

The stochastics in the daily charts, obviously swings a lot quicker than the one in the weekly charts, but is for the moment technically oversold. This should make it harder for the OMXS30 to establish itself below 1600. This technically oversold level should make it easier for the index to have a bounce to the upside.

An indication of such a move could be given if the index can establish itself above 1637. If this takes place, more short-term strength can be confirmed. Support levels can be found at 1656 and 1682.

Find the hourly chart below, where support and resistance levels can be found at 1612 and 1634. A move past any of these levels can signal either strength or weakness.

Hourly chart of the OMXS30                              source: Infront

 

 

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16/10/2019 21:54:13