OMXS30 shows signs of strength
Last week the OMXS30 hinted towards a turnaround showing some signs of strength. Even though market activity increased, it could still be seen as relatively low compare to this same period last year. It is probably only when the earnings season starts we will see this activity picks up. The long-term trend is still pointing upwards and the index does show some signs of strength. To confirm this, the index would have to establish itself above 1640, 1682 and 1720, alongside an increase in volume activity.
Bull & Bear-certifikat
The NASDAQ OMX continued its run last week with an increase in volume activity. The large-cap index ended the week on 1628,40. A very good start to the new year for the bulls.
Even though the volume activity has picked up, it still seems a bit apprehensive. This could all very well change once the company rapports are released in the end of January. Next week rapports start coming in from USA, this could affectively change the market climate in Sweden.
The big news last week coming out from the OMX large-cap index was that Tele2 is buying Com Hem. The deal seemed to benefit both companies, but the market deemed the deal generous, and sold Tele2, the stock went down -6,6 percent.
The bank stocks have had a good week with news that the housing market might be stabilizing. The banks weigh heavy on the OMX index and comprise almost a third of the index weight.
The US dollar continues its decline and ended the week at 8,05 to the SEK. The highest price in December you could get for a dollar was 8,52 SEK. The decline could be attributed to an over speculation in the dollar with the FEDs expected increase of the interest rate next month.
At the same time the ECB and the Swedish riksbank have sent signals that could be viewed as tightening to the market. Which have in turn increased the worth of the Euro and the Swedish crown to the dollar.
The long-term upward trend for the OMXS30 is still intact. In the weekly chart below, an increase in strength can be observed when the OMX broke through a downward sloping trend line and established itself above the 40-week moving average. The volume activity was not exceptionally high, which raises a few question marks as to the validity of the signal.
Weekly chart of the OMXS30 source: Infront
The OMXS30 retains its trend confirmation with higher highs, and higher lows. The stochastic indicator also illustrates that the index is technically oversold.
If the OMXS30 can establish itself above this summers high at 1682, and its all time high from April 2015 at 1720, more strength can be confirmed. We will have to wait and see if the earnings season can drive the market to these highs.
The conditions for such a move looks pretty good. The global economy is strong and market participants currently find themselves in a season that is usually good for the stock market. The leading US markets looks strong.
However should the market break in the opposite direction and break support at 1572 and 1518, weakness can be confirmed.
In the daily chart below, strength can also be recognized and the next resistance level rests at 1640.
Daily chart of the OMXS30 source: Infront
Support also rests at around 1608-1610 alongside the important 200-day moving average. The bulls would like to see price stay above this support, otherwise more weakness may be just around the corner. Next support level rests at 1560-1573.
The stochastic indicator in this chart also rests at high levels. In this particular time frame the index could be seen as technically overbought. As for now this should not be alarming, for a strong market can rests at these levels for a while if it is in a strong trend. One could however be on alert for a short pullback in an upward moving trend.
In the even shorter time frame, the hourly chart can be observed as having entered a consolidation phase. The index would show strength if it succeeds in breaking through resistance at 1635, and weakness if support is breached at 1621.
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.