OMXS30 hesitates at an important juncture

OMXS30 hesitates at an important juncture

12 December 2017 from Tradingportalen

The OMXS30 showed signs of weakness prior weeks when breaching support at 1600, but the nature of the move seems hesitant. The short-term trend points down, the market is currently technically oversold, and the long-term trend remains intact. If the OMXS30 should find it’s footing beneath 1591-1583 alongside an increase in volume activity, it increases the case for a weaker market. On the other hand, if the opposite should occur, and the index finds itself above 1640, the OMXS30 could find itself in different scenario.

 

Wrapping up last weeks trade the NASDAQ OMX closed green with an increase in volume activity. The Swedish large-cap index advanced 1,2% and closed the week at 1610,82. The total gains for the year are now 6,2% and 10% when including dividends.

Last weeks trading activity might have been inconsistent, but ended the week on a positive note. Mostly thanks to the finance sector which turned green when a proposal for Europeans banking regulation became public. Apparently the Basel IV regulation did not seem so bad as first expected.

Money managers have been passive of late in the markets; it might have something to do with the implementation of the new MIDFID II regulation. MIDFID II is a new regulation that is set to be in place on the 3’rd of January 2018. This requires firms to adjust their business models and routines. Their day-to-day operations and routines could change drastically.

Last weeks breakthrough in Brexit negotiations contributed to a lighter mood in the markets, combined with the fact that the American congress has temporarily avoided a federal shutdown. At the end of last week congress passed a law that allows the federal government to keep itself up and running until the 22nd of December.

For the OMXS30, the long-term picture has somewhat deteriorated in the past weeks given the failed attempt to stay above support at 1600 and its 40-week moving average. The stochastic indicator also hints at weakness and the next clear support level rests at 1500-1518.

Weekly chart of the OMXS30                                                source: Infront

The OMXS30 find itself at an uncertain juncture in this timeframe. It is consolidating around 1600 and the trend is still up. Confirming the trend with higher highs and higher lows, with a moving average heading north.

The chart shows weakness in a sense that it is not getting any clear signs of strength. For example, a breakout of the resistance at 1682 alongside an increase in volume could be such a signal.

In a shorter time frame the OMXS30 has shown signs of weakness. The short-term trend as defined by the 20-day moving average is also pointing down, illustrated in the chart below.

Daily chart of the OMXS30                              source: Infront

More signs of weakness would be shown if the index breaks support at 1591, 1582 and 1560. Signs of strength are shown if the OMXS30 can establish itself above levels 1640 and 1682.

There could be a glimmer of hope for some new strength given that the stochastic indicator is technically overbought. This in itself is not a clear sign of strength, but could give merit for a move to the upside, if such move should occur.

In the hourly chart below the OMXS30 is illustrating some interesting signs of strength, especially if the resistance around 1624 and 1629 are taken out.

Hourly chart of the OMXS30                              source: Infront

 

Important legal information

 

Legal notice

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.

 

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

09/12/2019 11:05:46

 

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