OMXS30 – Potential strength in OMXS30…

Last week Nasdaq OMX gained ground, during a time of increasing market activity. Swedish OMXS30 index gained +2.6 percent, and closed the week at 1637.82. So far this year, the index has gained +8.0 percent, and +11.4 percent adjusting for dividends.

Increasing optimism amongst investors caused the U.S dollar to strengthen, and stronger oil prices raised the sentiment in general. Investors showed a higher belief, that U.S president Donald Trump will be able to pull through with his tax reforms, which further added on to the optimism. Further on, U.S based companies would likely bring home capital from offshore, whereas an attractive tax reduction would be granted, which would most likely strengthen the U.S dollar even more.

In the middle of October, the earning season is in full force. Lower market activity is believed to be showing that some investors are in a bit of a waiting period, despite last week’s increasing market activity, which is relatively low historically. It seems that short-term investors are driving the market at the moment.

Based on a more long-term perspective, the last market gain is believed to be a bit unreliable. Today’s buyers could be sellers the next day. Based on a long-term view, which is believed to be more apparent, once the volume pattern will significantly increase, long-term investors with capital strong portfolios will drive the market.

The volume pattern is expected to increase sooner or later, and when it does it will give a clearer view of what is up ahead. In case it increases during a higher move, it would be considered a sign of strength, whereas it increases during a time when the market is moving lower, it would be considered weakness.

In our weekly chart below, OMXS30 showed potential strength, when resistance at around 1600 broke. But since the market activity is relatively low, this might be too early to be considered a confirmed sign of strength.