Strength appears in OMXS30
Last week OMXS30 showed strength when the index broke resistance at 1656-1660. Technical trends continue to look promising, and last market gain happened during a strong momentum and trading activity, which is considered to be positive.
Nasdaq OMX jumped considerably higher last week, stimulated by strong earning reports. OMXS30 closed the week at 1667.51, after a gain of +1.5 percent. This year alone, the index has gained +9.9 percent, +13.4 percent adjusting for dividends.
After considerable sleeping mode in the market, and irregular development up until earning season kicked off, the market finally started moving. Amongst OMXS30 companies, Atlas Copco, Ericsson, Tele2 and Volvo moved the market with positive reports. Instead Assa Abloy, Getinge, Handelsbanken, Investor and Telia flooded the market with negative price reactions after reports.
Earnings report from Volvo was strong, while Atlas Copco was as expected. When it comes to Atlas Copco, new orders surprised on the up side. Cash flow in Ericsson was better than expected, and CEO Börje Ekholm did therefore not see any reason for new issues of shares, which the market was previously anticipating.
When it comes to Assa Abloy the situation in China was causing risk awareness. Handelsbanken moved lower despite better result, and net interest income as expected.
Internationally the sentiment in the market was mainly positive. The U.S market got a bump after the senate approved budget resolution, increasing chances for president Donald Trump to pass tax reforms. These reforms are considered to be essential in order to stimulate growth in the economy, and is a key factor behind the U.S market gain since Trump was elected president.
If Trump is able to pass the previously communicated tax reforms, the market could be looking at extended strength, despite already being included in the last market gain. In case he would fail, the market could be looking at significant negativity however, where sentiment could be passed over even to the Swedish turf, and OMXS30.
OMXS30 did kick off the earning season in a positive state, and the index showed strength when it broke resistance area around 1656-1660 during a time of relatively high trading activity. The market turnover was however, not as high as the summers strong selling days, but despite this significantly higher compared to the last few months.
Preferably the turnover should have been higher during Fridays gain, which would in such a case make it clearer based on a technical analysis. The upcoming week is however treating the market with more earning reports, that might inject further strength.
Weekly chart of the OMXS30 source: Infront
As the index broke resistance, and showed strength at this time, this could potentially be indicating further strength up ahead. Upcoming resistance area is awaiting at 1700-1720. In case the index would break this resistance area, and make a new all time high this could be injecting even further strength, in case it happens during a time of relatively high market activity.
Stochastic-indicator is still located in the weekly chart at high levels, and technically overbought levels. This is not signaling a sell signal on its own, but could be an indication that weakness is about to come to light.
In the daily chart below, the last few weeks have shown strength in OMXS30, last being when resistance at 1656 broke. The volume also started to pick up last week, and showed significant gain, compared to previous weeks.
Daily chart of the OMXS30 source: Infront
Both the long-term 200-day moving average, as well as short-term 20-day moving average is showing strength.
In between, the 50-day moving average is closing in on 200-day moving average from below. In case it would break MA 200, a so cold Golden Cross signal would appear, according to technical analysis. This would in such a case, make the previous Death Cross signal from September to be obsolete.
Dramatic names of technical terms, which is more considered to be an indication that any positive or negative trend is potentially about to change.
In case OMXS30 would start breaking support levels, during an increasing market activity, this would be considered to be negative based on a longer perspective.
Support is awaiting at 1660 followed by 1656. In case the index would break support at 1634 during a time which the market turnover would be significantly higher compared to Fridays gain, when it was 22 billion, this could be signaling more significant weakness in the market up ahead.
OMXS30 could be looking at more significant weakness, in case it breaks these support levels. Strong technical support is waiting at 1600, 1560, and around 1518.
Potential weakness during a time of low volume, and market turnover with 15 billion tops, would be considered less attractive, and might be signaling the market the weakness could be short-sided.
Based on a more short-term perspective, looking at the hourly chart below, OMXS30 came in with strength when it broke resistance at 1644, 1649. Significant technical support is now located at 1656, as well as 1649, and around 1634.
Hourly chart of the OMXS30 source: Infront
Based on a long-term perspective however, 1690-1700 could be in the ball park, secondly 1720, but might as well turn to the lower side, in case OMXS30 breaks support around 1656, 1649 and around 1634 during a time of increasing trading activity.
Even if OMXS30 triggered strength when it broke support last week, volume pattern continue to be negative, despite turning to the positive side on Friday.
Weekly chart of the OMXS30 source: Infront
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