2018-05-20: Weekly update on OMXS30, SP500 and Euro/Dollar

The last week saw most major indexes strengthening. Likewise the dollar continued to gain on the euro and the yen. The cryptos have lost in value and are now trading around critical levels.

OMXS30

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What has happened?

Things are beginning to brighten for OMXS30. This week began with a couple of tests of the 1952-level (the central black line), which held firm. From there followed quick retrace to last week’s highs, where we are stuck right now. In short, these are bullish signs. All attempts to sell have been short-lived, even if they often were strong, and price appears to have established itself above the 1952-level. Additionally, and arguably of greater importance, the roof of the sloping trend trendline has been breached. All this is happening at a time when MA-200 is turning positive. This makes the case even more bullish. As I wrote last time, should May close around these levels (or higher) a positive continuation formation has been formed in the monthly graph just at the positive up-trend. This is worth noting.

What to expect?

From a long term perspective, a definite breach of the negative trendline is bound to initiate a new trend-logic. That would entail a positive up-trend, which is more common, or a phase of sideway trending. These lines are, however, not set in stone and we still are too close to from the break-out. What I mean is that a sharp sell-off in the upcoming days would reset this. But as I said, this looks less likely today than last week.

In the short term, we might expect some volatility in-between the 1650 and 1592-levels but, I see 1650 as a probable next stop. Should we, on the other hand, see a breach to the downside (below the roof of the negative trendline and 1650), then I would interpret this as a sign that the negative trend channel being intact. If so, one plausible “first stop” could be the top of the box which converges with the long-term up trend around 1530 (see the red circle).

Long-term view: Neutral
Mid-term view: Neutral
Short-term view: Positive

 

SP500

S500-20180521

What has happened?

The SP tells a story similar to that of the OMX. After breaking up from the negative triangle last week, price action this week as been constrained with just minor moves. In the US, there was not time for major trends to turn negative, as in Sweden, and this makes last week’s breakout appear even more attractive. This view is also strengthened by the strength of the breakout.

What to expect?

As always, markets have been choppy since the beginning of the year, with huge selloffs appearing from nowhere. That being said, this breakout looks genuine and it makes the bull case seem very plausible. If this positive note is maintained, we might expect steady gains with our first target around 2790. Should prices drop, breaking below the roof of the box at 2710, we should turn our eyes to the area around the MA-200 where selling has been sucked up before. This should occur around 2650.

Long-term view: Positive
Mid-term view: Neutral
Short-term view: Positive

 

Euro/Dollar

EURUSD-20180520

What has happened?

Contrary to my vague predictions of a potential trurn-around at 1,1875, that saw a small rally, prices fell massively – breaking through the resistance with apparent ease. This effectuated a negative signal in the MACD and underlined the strength of the dollar. Looking at the monthly graph, the negative turn we saw in April came close to the top of the negative trend channel in which we have been trading for – give or take, the last ten years. Time is everything in trading and going against such a trend should not be undertaken lightheartedly. However, there still is some scope before we reach the roof of the negative channel and the question right now is whether this is the real thing or merely a minor chop on the road to 1,24.

What to expect?

Rigth now, much speaks in favor of increased strength for the USD. However, we are reaching an area with several levels of resistance. To begin with we have 1,17, which is quickly followed by the midterm uptrend a couple of points below. Still having so much strength in our backs, the Euro has been gaining for close to two years, much speaks of this being a minor chop. In this case, I repeat my guess that a turnaround is to be expected. Can this not be the beginning of the end of the bullmarket for the Euro? Surely, but in that case we need more of a footing to be certain. However, a breach beneath the midterm up-trend around 1,166 should be a signal that this might be the case.

 

Long-term view: Positive
Mid-term view: Negative
Short-term view: Negative

 

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