OMXS30 hesitates at significant levels…
OMXS30 continues to build momentum within 1600 and around 1657. Should the index find ground above technical resistance at 1657, this might be a sign of strength.
Last week Nasdaq OMX moved slightly higher, with irregular development. Swedish stock index OMXS30 gained +0.5 percent, and closed the week at 1654.80. Since the beginning of the year, the index has gained +9.1 percent, +12.5 percent considering dividends. The long time development of the index OMXS30 is as follows:
Weekly chart of the OMXS30 between the 1st of June 2012 and the 9th of June 2017 source: Aktiespararna
The market was relatively undramatic, despite the election the U.K, the hearing of the former director of FBI, and the ECB-meeting in Brussels.
We do believe there might be warning signs however, of a potential less of a strength in the positive sentiment up ahead. During days when the market moves lower, the strength, the volume is relatively high. This could be a sign of weakness, and that sellers might be more dominant up ahead, in favor of buyers.
The U.S dollar, and the long-term interest rates are no exception to this, as we believe some negativity could have arisen, potentially due to concerns as well as slower state in the financial market. Even Nasdaq Composite could have started to diverge from the previous strength.
So far, we believe the long-term view could be positive for OMXS30, and could have been since last summer. The index is showing, based on a more long-term view, pattern of higher highs and lows. The 200-day moving average is also continuing to show strength, which is believed to be a positive sign.
Based on a more short-term view, OMXS30 could be still building momentum sideways. Technical support levels are located at around 1600, and resistance levels at around 1657.
Daily chart of the OMXS30 between the 31st of January 2017 and the 9th of June 2017 source: Aktiespararna
OMXS30 could gain even further momentum, if the index would find ground above resistance at 1657, preferably if the market turnover is at least 20-25 billion per day. This might increase the chances, that we could potentially move towards 1700-1720.
Potential negative signals could arise, if the index started to find ground below the technical support level at around 1600. Same view applies in this scenario, that in order for this to be potentially considered a more significant sign of weakness, the market turnover would have to be of significance. In this case the market could move as low as 1540-1544.
If these signs would appear during days when the market turnover is relatively low, we do not consider these as very significant, as it could rather be signs of fake breakouts.
The Stochastic-indicator is starting to move up to more overbought levels. This might increase the risk when the market on and off moves lower, but we do not consider overbought levels to be a sign of a lower move up ahead, as the index can continue to be overbought in Stochastic for a longer period of time, in a strong market.
Based on a more short-term view, there might be a slight higher risk that the index could move lower. Periodically after midsummer, the index is not uncommonly showing strength, to later show a market peek sometime in July or August. This might be a typical pattern, but is important to know that it does not need to apply every year.
Hourly chart of the OMXS30 between the 18th of May 2017 and the 9th of June 2017 source: Aktiespararna
In the hourly chart above, from a technical standpoint moving below support levels around 1640, 1636 and around 1624-1626, could indicate a potential lower move ahead.
Based on a more short-term view, we might see a trading interval between 160-1650/1657. Breakouts might give a more significant move, as momentum could build up.
The volume patterns, season patterns, U.S dollar, long-term interest rates and Nasdaq Composite Index might have started to show signs of weakness.
From a long-term perspective, the trend could still be strong, but considering our statement above, there might be signs of weakness, and reasons to be more alert.
Should OMXS30 find ground above our early high of 1657, during relatively high market turnover, this could be a potential sign of strength that could override previous warning signs, and be strong enough to move OMXS30 as high as 1700-1720.
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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.
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