OMXS30 triggered warning signs, and challenges the positive trend
From a long-term view OMXS30 is still trading within the positive trend. The index traded lower during high activity in the middle May, which caused warning signs to be triggered. This increases the probability that the positive trend will be questioned within the nearest months.
Last week Nasdaq OMX had an irregular week of lower trading activity due to the holidays. Swedish stock index OMXS30 gained modestly +0.4 percent, and ended the week at 1635.77. Since the beginning of the year the index has gained +7.9 percent, and +11.2 percent if including dividends.
The news has been relatively calm for stocks within OMXS30. Breakout was triggered for Ericsson, based on speculations that Christer Gardell from Cevian Capital has bought a significant post. The sector colleague Nokia gained some ground, after a settlement with Apple regarding patents was cleared, which gave extra fuel to the move for Ericsson.
The US dollar has lost some ground, which could be a negative factor for not only Ericsson but also the market sentiment overall. As usual it is U.S president Donald Trump and the increasingly political worries that are the cause. Infrastructure and tax reductions to name a few, is some of the parts that is currently questioned that is expected to kick off not only growth but also inflation.
If the political worries are not cleared, this could indicate that we would get an even lower move for the US dollar. German chancellor Angela Merkel, did not help the situation when she declared the Euro to weak.
A company listed within OMXS30 that gets a positive effect of a weaker dollar is H&M, which during last week also experienced a breakout. The main owner Stefan Persson and stock profile Sven-Olof Johansson has made significant stock purchases in H&M during spring this year.
The long-term trend for OMXS30 still seems to be strong. The index is trading well above the 200-day moving average, and shows higher highs and lows.
Even the short-term trend, which we define as the angle of 20 day moving average is strong. The index is however, trading below the 20-day moving average, which could be a sign of weakness.
Daily chart of the OMXS30 between the 17th of January 2017 and the 26th of May 2017 source: Aktiespararna
A recent warning sign to the positive trend has been triggered, when the index moved lower on 18th of May with a turnover of over 24.7 billion. This could indicate that sellers are more awake, and alert. This could potentially indicate that the positive trend is about to pan out. The move from around 1604 has also been with slightly less trading activity.
What we are looking for, to minimize the risk based on the warning signs, is to see the index move higher during similar turnover. At least with a minimum of 20 billion per day during the days when the market moves higher. Finding ground above resistance level 1657 could also be a positive piece of the puzzle.
Finding ground above 1642, could trigger a potential move towards next resistance level at around 1657.
Should the index start to trade below 1626, this could instead indicate we are about to move even lower towards support area around 1600-1604.
It could be very negative if OMXS30 starts to trade below support area around 1600-1604, especially during high trading activity. This could indicate we are about to move even lower. In this case we would look for support levels around 1585, 1544 and around 200 day moving average which is currently at 1516.
The Stochastic-indicator is in neutral position, and does not currently give us any clear guidance.
From a more short-term view, the clear trading interval currently indicates support around 1626, and resistance around 1642.
If the stock index would find ground above 1642, this could indicate a higher move towards 1657.
It also means that if the index finds ground below 1626, this could indicate a lower move towards 1600-1610.
As a summary, this means from a more long-term view, that the trends could be still positive, but warning signs could have been triggered.
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