OMXS30 – new potential strength in an upwards moving trend

OMXS30 – new potential strength in an upwards moving trend

07 November 2017 from Tradingportalen

New positive strength was noticeable last week as the resistance around 1671 was breached on the OMXS30 index. The trend seems to be pointing upwards and sights are set at the all time high around 1720. However, the Nasdaq OMX is slightly technically overbought and the positive market-climate might be dependent on the outcome of the new tax reform plans being passed in the United States. With this in mind, keeping a watchful eye around the 1634 and 1600 support levels is warranted.

The Nasdaq OMX rose last week with but with a lower activity than observed during previous weeks. OMX large cap index ended the week on 1677,65 points for an advance of 0,8%. The OMX-index is up 10,6% for the year, 14,3% when taking dividends into account.

Coming off an intensive period of quarterly earnings reports, the OMX saw volume slightly lower last week. This could also be affected by the half-day trading on Friday, and the schools leaving for fall break.

Lundin Petroleum, SCA and SKF were among the reports that were received in a positive light by the market.

As expected the American central bank, the Federal Reserve, decided to keep interest rates unchanged. President Donald Trump nominated the Federal Reserve governor Jerome Powell as the successor to Janet Yellen.

Yellens term as FED chair ends in Febuary of 2018, and Powell has been first in line as her successor. An uncontroversial choice and pundits seem to agree that the choice of Powell as FED-chair won’t lead to any big changes in fiscal policy.

Republicans also laid out a plan for tax reform with lower corporate taxes and lower taxes for middle-income families. It is proposed that the corporate tax will decrease from 35 to 20 percent. This might also make it easier for American companies to gain profits abroad, which could be positive for the dollar. A strong dollar is usually good for most companies listed on the OMX exchange. Getting this tax plan passed could be important in order for the positive climate in the stock market to persist.

The OMX-weekly chart below shows an upwards moving trend above the 40-week moving average. If the OMX-index establishes itself over the resistance levels of 1600-1660, it could be an indication of a high move to come.

The stochastic indicator is not as positive, and shows an overbought tendency. This is not in itself an indication of a coming downturn, but it could be seen as a sign for caution.

Weekly chart of the OMXS30                                                source: Infront

To gain a clearer picture of an eventual lower move on the weekly chart, the OMXS30 must establish itself beneath these support levels: 1600 to 1518-1500. For the mean time, it looks like the index could continue its move towards the all-time high set in 2015, and possible break for a longer upside movement.

The chart below shows the OMXS30 on a daily time fram. Note that since September, this time frame also consists of lower highs, and higher lows. The last time OMXS30 got an indication of a higher move to come was when resistance was breached a 1671.

Daily chart of the OMXS30                              source: Infront

The volume shows us that the shares traded on updays (green bars), are significantly higher than the ones on downdays (red bars). This could be a sign that the buyers are holding on to their shares and are in for the long haul. This could potentially enforce a view of a more positive scenario if this volume activity persists, and gets stronger.

When the 50-day moving average (the blue curve) passed the 200-day MAV (the red curve), the OMX got what is referred to as a Golden Cross. This is a signal that could be viewed as an indication of a coming movement to the upside. It took out the Death Cross signal established earlier in September.

Also note that the stochastic indicator in the daily chart is technically over bougth. This does no necessarily mean a downturn is imminent. An index can continue to be overbought for quit a while. Caution should be raised if the stochastic indicator starts to lag an upwards moving market. This could be a sign that the market is losing its momentum, and the move is fading out.

As long as the market retains its movement to the upside, the view look positive for the bulls.

On the other hand, if the OMXS30 should break its trend and challenges the support levels at 1656 and 1634, the index might find itself in a new scenario. Especially if this coincides with a volume increase of 20-25 billion shares per day, the support level at 1600 should be watched closely.

In the chart below the OMX is viewed on a shorter time frame. Observe that also this chart finds itself in an upwards movement. If this chart can establish itself above 1681, it could mean a movement to the upside is developing. However, if it breaks support at 1665, the opposite could become a reality.

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.

21/10/2019 23:09:11