OMXS30 – short-term strength appears?

06.09.2017 | 1 min lukea
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Last week OMXS30 started showing signs of short-term strength at technically oversold levels. Despite the increased market activity, it is still at relatively low levels.

Nasdaq OMX started moving higher last week, during increased market activity. Swedish stock index OMXS30 gained +1.2 percent, and closed the week at 1558.79. Since the beginning of the year, the index has gained +2.7 percent, and +6.0 percent adjusting for dividends.

Worries continues to be a cloud over the market, surrounding the issues around North Korea. In the beginning of the week, the launch of a missile from North Korea to the northern part of Japan, was put to ease at the end of the week. As of now, no one is seriously considering the threats to be put into action. The tension surrounding the countries, is however causing temporary market volatility, and a weaker U.S dollar. This morning another worry came to light, after a hydrogen bomb was set off from North Korea.

The last few months, the market has been quite aligned with the movement in currency market. The weaker U.S dollar has significantly damped the European market.

Last week ECB showed concerns about the latest strength in the euro against the dollar. This contributed to even further gains the last couple of days in the euro.

The U.S. dollar is still trading around the significant support level around 7.9-8.0, against the Swedish krona. If the dollar would break support, this might fuel an even lower move. In such a case, the U.S dollar might potentially go as low as 6.8-7.0 in the future. Technically the dollar is oversold, which might cause a bounce, before we might see a significant test of support.

In the news amongst companies listed in the stock index OMXS30, Lundin Petroleum came out with negative news last week surrounding an oil drilling site, which caused the stock to tank around -6.5 percent. Volvo on the other hand, were embraced by investors as it moved higher due to adjusted financial targets.

Surprisingly the market did not move, during the disappointing job data on Friday from U.S. On one hand, the market might consider this as a sign that the U.S economy is stable, and on the other hand it might as well be considered as an underlying strength.

In case of an underlying short-term strength, we might be looking at a lower move up a head.

We are trying to identify any potential confirmation, that might come to light if OMXS30 were to start find ground above resistance around 1560, as well as 1583. A market turnover of at least 22-25 billion per day, might just be the strength the market need as a confirmation.

Daily chart of the OMXS30 between the 16th of January 2017 and the 1st of September 2017                         source: Aktiespararna

If OMXS30 were to find ground above the significant technical resistance around 1600, at a time during increased market turnover, our view would be strengthened. In such a case, we might be looking at an even higher move towards previous yearly high around 1659.

The potential strength might not be as solid, in case of a market turnover of considerably lower than 20 billion per day. As it would rather weaken the long-term view.

The long-term view is believed to be showing signs of potential weakness. When OMXS30 broke support at around 1600 this summer, it fueled our view of a potential continued weakness.

Currently OMXS30 is trading below the 200-day moving average located at 1572. Volume pattern is still negative, and the chart shows a picture of lower highs and lows. So far MA 200 is still showing strength, which is trying to fuel hope to any long-term view.

We might be looking at continued weakness, in case OMX30 starts breaking support, at around 1518 and around 1499-1500.

Primarily we are looking at the market activity, as this would enforce a potential strength or weakness in the market. Maybe OMXS30 is on its way to break support around 1499-1500, only time will tell…

Within a negative trend, it is quite natural for the market to take a breath, and briefly trade higher. It might just be a few percentages to test resistance area around 1580-1600, from technically oversold levels, before it continues to weaken.

Last week OMXS30 showed signs of strength, when resistance levels broke at 1525, 1532-1535, and around 1552. It also happened during slightly increased market activity, which might be a sign of potential strength.

Unfortunately, the market turnover has not been as strong, as it were when the market traded lower during May to June. Therefor we are keeping our eyes very closely on the market, as any potential strength or weakness might be temporary, or here to stay.

Hourly chart of the OMXS30 between the 9th of August 2017 and the 1st of September 2017                              source: Aktiespararna

In the hourly chart above, OMXS30 might show signs of strength for further gains, if resistance around 1560 break. The same rule applies for potential weakness, if OMXS30 breaks technical support at around 1554, 1552 and around 1545.

Based on a short-term view, we are keeping a closer look at resistance around 1560, and around support at 1552-1554. In case where buyer steps in when resistance at 1560 breaks, we would keep a closer eye on resistance area around 1580-1583.

In case of OMXS30 starts trading below support around 1552-1554, we might be looking at an even lower move. In such a case, we keep a close eye on support levels located at 1532-1535, and around 1518-1525.

Based on a long-term view, we are slightly worried, as the continued weakness in the volume pattern, and lack of strength during a time when the market breaks resistance, is moving higher.

Weekly chart of the OMXS30 between the 31th of August 2012 and the 1st of September 2017                             source: Aktiespararna



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