OMXS30 approaches resistance with taut rubber cord

This is how I wrote yesterday, December 1 :  The relatively strong finish yesterday will probably spill over when the Wednesday market opens. As long as the index stays above 1110, it is positive .

Technical Analysis OMXS30 : The opening with a gap, which never came close to being closed, combined with strong macro numbers strengthened the buyers who never let the sellers into the match. Apart from a few minor mud puddles that provided the opportunity to enter via Reverse and Go, it was a wonderful climb all day. The close at 1134.27 meant an increase of a whopping 2.46 percent and a new high for the year closing at the day’s high. Although turnover of SEK 18.7 billion was lower than on Tuesday, it was 38 percent higher than the average.

The opening yesterday meant a pattern gap where the buyers never let the sellers in. Wednesday’s strong price stack without any real tail on the upper side was a real demonstration of strength that the buyers had been charging for a long time. As long as the index stays above 1123, which is the 50% level of Wednesday’s price bar, the buyers will dominate, but if this level is punctured, it will strengthen the sellers. An open with a gap and a close above 1134 is desirable but we should be prepared for some profit taking without getting nervous and losing the compass.

Then finally the expected breakout came and after such a long consolidation we could expect a strong breakout and it is no exaggeration to say that our prayers were heard.

We now continue to navigate towards the target price at 1200 and it will be exciting to see if this will be a final or a stage target (see the inset image “19 years”).

All four trend lines (MA-200, MA-100, MA-50 and MA-20) are sorted in the correct order, with the price bars at a comfortable distance above. Yesterday’s closing was 8.1 percent above the 200-day average (1043), which, while it is a statement of strength, also means that the stronger rubber band is being stretched ever tighter.

The roof of the wedge is today at 1140 and the rubberband is starting to get tight on the upside, which is likely to lead to profit takings when challenged.

Yesterday, the roof of the triangle-like formation of daily momentum (RSI-14) was broken and the patient trader was paid for a long wait. MACD which indicated buy a few days ago is now strengthening with increasing histogram bars. However, it may be appropriate to keep track of the divergence of the current level in some charts as a target price (not in the middle).

The VIX, which measures the volatility of options on the S&P 500, fell yesterday by 9.26 percentage points to 21.36, which means that the index is down to a level that allows for continued gains (see the inset image of the VIX). As long as the VIX is quoted between 17.5 and 22.5, it is relatively calm, but when the levels above 25 approach as quickly as the day before yesterday, we must raise our guard, this means that more and more people are speculating in derivatives for declines (buying puts) and this the investor collective must do quickly, but it automatically creates a concern even if there is no imminent danger yet. If the VIX continues above 25, it can start to draw more and more focus from the previously positive sentiment and it creates more and more pressure to protect their positions and the implied volatility rises and creates even more anxiety. However, the index is still at a level that is okay. It is best if the VIX continues between 16.5 and 22.5, which reduces the reasons to protect positions and enables further rises. However, if the index falls down towards the 15-16 level, it means, as I usually say, “a deceptive calm”. Then many people lower their guard and think that it is easy and optimism sprouts, that is when there is the greatest risk of a turnaround.

In the long term, the trend continues to point upwards, with all the averages “sorted in the right order” and the rate at a comfortable distance above them all. Although yesterday’s eruption was expected, it was more powerful than I dared to dream. The target price at 1200 is firmly fixed and it will be exciting to see if it will be a final or a stage goal.

Even in the medium term (weeks to months) I have 1200 as a target rate. 1120 now forms a secondary support and 1123 forms the sentiment level.

In the short term (a few to a few days) it could be tough as the index now approaches the ceiling of the rising wedge at 1140 with an already tight rubber band. As long as the index stays above 1123, the short sentiment also remains positive.

Summary : The strong development yesterday and the closing at the day’s high should spill over into the opening today. The question, however, is whether it is enough to pass the resistance at 1140 where the sellers will attempt an attack. As long as the secondary support at 1120 is not punctured, I see the development positively.

Resistance: 1140-1142 / 1149 / 1172 / 1200
Support: 1123-1119 / 1110 / 1104-1096 / 1082 / 1060 / 1043

You can trade OMXS30 with the following mini futures:
Up :  MINILONG OMX V with a leverage around 7.25 and a stop loss of 1007.00.
Decline :  MINISHRT OMX E with leverage around 11.20 and a stop loss of 1198.00.