This weeks headlines

Where do we go from here?

The new normal
Valuations are increasingly data dependent
Uncertainties in the commodity trade
OMXS30 - Make it or break it
Bearish setup in Brent

WEEK 7

Where do we go from here?

The Swedish stock market has declined

significantly in recent months, but as of yet
the US S&P 500 index has held up quite well.
Most economies continue to grow and most
central banks continue to provide the market
with stimulus, which should set the stage for
a rising market. The stock market is also less

expensive compared to the highs set last summer and

the low price of oil still has the ability to boost global
growth going forward. Another bullish argument is that
severe bear markets tend to coincide with recessions
and since no recession is in sight, a more severe bear
market remains unlikely. Bears on the other hand like
to point out that the global economy remains fragile
and that some leading economic indicators such as
the Baltic Dry Index are showing that the economy is
slowing down significantly. Even more troublesome is
the crashing high yield market which will increase the
borrowing cost and default rate among US companies.
Another argument is that bear markets tend to surface
slowly and that the stock market tends to reflect
deteriorating fundamentals long before a recession
becomes obvious. It is possible that the recent sell-off
is a sign of bad news to come and that the bad news
will surface serially in the coming year. One
concerning aspect in todays market is that investors
remain highly leveraged, which makes the market
susceptible to larger corrections if the economic
situation were to deteriorate. Margin debt is debt used
to buy stock and New York stock exchange margin
debt is still at near record levels. NYSE margin debt,
adjusted for inflation, is actually higher today than it
was at the peak of the market bubbles in 2000 and
2007. This record high margin debt could be a
potential powder keg for a sell off. If the keg were to
explode it could create self-reinforced selling, as
overleveraged speculators are forced to sell their
positions no matter the price, during a so called
margin call.

Bonds and Forex

The new normal

In Janet Yellens testimony held last Wednesday she
stated that the window for further rates hikes is not
closed for the coming year. At the same time Yellen
pointed out that the current turbulence on global
markets diminishes the probability for the occurrence
of such a happening in the near future. Yellens most
interesting point was, however, that the Federal
Reserve will start to investigate what impacts a
negative interest rate would have on the US monetary
system. She said that implementation of negative
interest rates would likely not occur but that the FED
does not rule it out and are prepared to implement
them in case the economy sinks into recession.
Central banks increasingly seem to consider the
possibility of implementing negative interest rates.
Most recently the Bank of Japan made the move and
followed in the footsteps of its counterparts in EU,
Sweden, Denmark and Switzerland. The limit for how
far the central bank can push their expansionary
monetary policy seems at the same time to be pushed
more far away. Last Thursday the Riksbank lowered
the Swedish interest rate yet again, this time by 15
basis points down to -0,5 %. As a result the Swedish
two-year bond yield fell by four basis points to 0,62 %
and the krona depreciated 1,6 % against the Euro. The
USD/SEK on the other hand depreciated and cancelled
out the appreciation caused by Yellens speech the day
before. Disagreements about cutting or not cutting
interest rates are growing, both in the markets and

within the board of the Riksbank. Some might have

the view that consistency is a good thing to maintain
credibility, but when wage negotiators are unwilling to
raise their expectations of inflation the rate-cut-tool
have proven to be faulty. If more central banks in
addition decide to join the currency battle, the
Swedish Riksbanks policy might be even more
doomed to fail. Is now a good time for governor Ingves
to reconsider his policy and dig deeper in the toolbox
to find a more innovative solution for reaching the
inflation goal?

his name as he told listeners of last weeks stockpodcast that hes still quite unsure and that the sellbutton is close at hand. One of the concerns of not
only Dr.Baisse, but the rest of the investor community
as well is the recent carnage that has taken place in
credit default swaps for both European and American
banks, which has increases the likelihood of another
banking crisis. Someone who doesnt seem to care
about the recent turmoil is JPMorgan Chases CEO
Jamie Dimon, who last week announced he has bought
JPMorgan shares for a whole years salary.

Stocks

Commodities

Valuations are increasingly data dependent

With the Federal Reserve emphasizing that their future
course of action will very much depend on economic
indicators such as the labor market and investors
carefully contemplating how this will effect valuations,
its probably fair to say that stock valuations are
increasingly dependent on macroeconomic data. This
week the US will be less focused on the state of the
labor market and more focused on industrial
production and inflation. How the markets will react is
quite hard to predict seeing how outcomes that are
better than expected could be interpreted as negative
for the stock market and vice versa. The European
large cap indices has underperformed the US ones so
far this year, but now one of the most prominent
bearish investors in Sweden Dr.Baisse (as hes
frequently called by his podcast partner) has sold off
his short position and bought some stocks for the first
time in a long time. However, Dr.Baisse stays true to

Uncertainties in the commodity trade

This week, the commodity trade has been very
volatile. On Wednesdays trade, oil plunged as the
monthly report from OPEC indicated that supply will
exceed demand by 720,000 barrels per day in 2016,
up from 530,000 bpd implied in the previous report.
Supply from OPEC could also rise further due to the
sanctions being lifted on Iran, as Iran is aiming to
increase its output by 500,000 bpd. Data from the
Department of Energy showed also that oil stockpiles
rose above 500 million barrels last month, reaching
the highest since 1930, thus fueling the bearish view
oil. Chief Executive Officer Robert Dudley said on
Wednesday at the International Petroleum week
conference in London, that by the end of the year,
people will be filling their swimming pools with oil
and that he had a very bearish view on oil. This plunge
ended pretty quickly on Friday when global oil prices
surged more than 12 percent. The surge sourced from

a report that suggested, once again, that OPEC might

finally agree to cut oil production. The trade closed
with Crude oil at 29.07 dollars a barrel and Brent oil at
32.79 dollars a barrel. On Thursdays trade, gold price
surged more than 5 percent to a one year high,
reaching 1.263,47 dollars an ounce. Much of this was
due to the growing fear on a global recession, drawing
investors to gold which tend to be a safe-heaven
investment in uncertain times. Negative interest rated
and devalued currencies in countries all around the
world also helped push gold to the new highs in
Thursday. Chief executive officer Jeffrey Gundlach, cofounder of DoubleLine Capital, said on Thursday that
gold prices will most likely reach 1.400 dollars an
ounce, as investors loses faith in central banks. On
Fridays trade, gold fell marginally, stabilizing at
1.238.30 dollars an ounce.

Small Cap

A summary of Analyst Groups latest analyses

Lexington
Lexington is active in the Nordic countries in the
design, marketing and sale of premium lifestyle
products mainly in textiles and related articles, but
also in clothing. The products are characterized by a
classic design inspired by the American east coast and
New England in particular. The company is
represented in 20 markets through its own stores,
franchise stores and through some 900 independent
retailers. The revenue of 2015 will be greatly impacted
of the results in Q4 being by far the most important

quarter historically. The revenue is estimated to

increase by 15 Mkr due to four new wholly owned
stores being opened. However, the profits are
estimated to be much lower this year due to a drop in
demand. Part of the company strategy is to acquire
franchise stores because the wholly owned store
concept has been deemed much more profitable. The
acquiring of one franchise store is estimated to
generate a surplus of 4 Mkr per year. The company
target of an EBITDA margin of 10% seems high at the
moment much due to establishing costs. The company
growth strategy includes the opening of at least 10
new stores the next two years.
SpectraCure
Spectracure is focused on cancer treatments with
medical systems using laser light sources and photoreactive drugs, referred to as "Interstitial
Photodynamic Therapy", PDT. This treatment method
is suitable for internal solid tumors of various types,
e.g. prostate and pancreas, but also other indications
as cancer of the head and neck. The software
controlling dosage, IDOSE, which are proprietary and
patented, ensures safe, accurate and effectively
controlled PDT treatment of internal solid cancer
tumors. SpectraCure planning to start Phase I and
Phase II clinical trials in autumn 2015. SpectraCure
have secured funding by a successful follow on
offering in the spring of 2015. The revenue for each
patient is estimated to $35000. The cost for the
equipment which can be used three times per day is

$50000 and has a lifespan of 7 to 8 years. The US

market for the product is estimated to be worth $270
M and the annual compounded growth is estimated to
be 11.5%. SpectraCure have completed extensive preclinical trials with over 3000 patients suffering from
skin cancer treated. Beyond that has 4 patients with
prostate cancer been treated. No evidence of side
effects has been discovered so far.
AGES Industri
AGES is specialised in die casting of aluminium and
machining of aluminium and stainless steel. Their
largest customer groups are the automotive and
engineering industries in Sweden and Europe, with the
automotive industry standing for 75% of the company
s revenue. The shift in this industry towards lighter
materials, a result of stricter regulations put on fuel
consumption, works in favour of AGES with their
specialisation in the light metal aluminium. This large
exposure towards one industry is however also one of
the companys biggest weaknesses. AGES has a
competent management, including chairman of the
board, Sune Lantz, who has previously been CEO at
ITAB and XANO and has long experience in the
business. Insider ownership is significant, comprising
35% of all stocks. Focus on strategic partnerships,
hedges against rising aluminium prices, and realised
investments in die casting capacity speak for stable
cash flows in the future. In both the bull, bear and
base scenario, AGES is expected to have a lower P/E
value than market average, yet still yield more and
have higher margins of profit than its peers. This

indicates an undervaluation of the stock, and holds a

potential up-side of more than 100%.
BTS Group AB
BTS Group is a Sweden-based consultancy firm that
works with management consulting by using
customised simulation models, and has a leading
position on the market. It operates in 53 countries and
has over 30 of the Global Fortune 100 companies as
their customers, including Google, Toyota and HSBC.
Over the last decade, BTS Group has seen an average
annual growth in revenue at around 16.5% and an
average operating margin at around 10%. Even
though the company had some poor performance in
2013, due to now implemented improvements and
investments this is not deemed likely to occur again
anytime soon, and the growth is expected to continue
on its positive trend, mainly through acquisitions.
Revenue streams are fairly stable as a result of
customer contracts running over periods of 6 to 8
years. Exposure toward currency risk is small since
revenue and expenses are usually in the same
currency. High ratio between quality working capital
and liabilities decreases the risk for defaulting, and
the wide variety of customers from different industries
helps minimise risks further. A fairly low free float
makes for illiquidity and could, together with
significant customer bargaining power and large
dependency on the North American market, be a
potential threat.
MACRO EVENTS WEEK 7

Monday
Japan: GDP Growth Rate QoQ Prel Q4India: GDP
Growth Rate YoY Q4 and GDP Growth Annualized
Prel Q4
China: Balance of Trade JAN, Exports YoY JAN and
Imports YoY JAN
Euro Area: Balance of Trade DEC and ECB President
Draghi Speech
Sweden: Capacity Utilization QoQ Q4
Tuesday
Great Britain: Inflation Rate YoY JAN
Germany: ZEW Economic Sentiment Index FEB
United States: Fed Harker Speech, NY Empire State
Manufacturing Index FEB, NAHB Housing Market
Index FEB, Overall Net Capital Flows DEC and Foreign
Bond Investment DEC
Wednesday
Euro Area: ECB Non-Monetary Policy Meeting and
Construction Output YoY DEC
Great Britain: Claimant Count Change JAN
Unemployment Rate DEC and Average Earnings incl.
Bonus DEC
United States: Building Permits JAN, Housing
Starts JAN, PPI MoM JAN, Core PPI MoM JAN, Redbook
MoM 13/FEB, Capacity Utilization JAN, Industrial
Production MoM JAN, Manufacturing Production YoY JAN
and FOMC Minutes
Japan: Balance of Trade JAN, Exports YoY JAN, Foreign
Bond Investment 13/FEB, Stock Investment by
Foreigners 13/FEB and Imports YoY JAN.

Thursday
Sweden: Inflation Rate YoY JAN and Inflation Rate
MoM JAN
China: Inflation Rate YoY JAN and PPI YoY JAN
Euro Area: European Council Meeting , ECB MP
Meeting Accounts and Current Account DEC
United States: Fed Bullard Speech
Russia: PPI MoM JAN, Retail Sales YoY JAN,
Unemployment Rate JAN and Real Wage Growth
YoY JAN
Canada: Wholesale Sales MoM DEC
United States: Continuing Jobless Claims 6/FEB, Initial
Jobless Claims 13/FEB, Philadelphia Fed Manufacturing
Index FEB, CB Leading Index MoM JAN and Fed
Williams Speech
Friday:
Euro Area: European Council Meeting and Consumer
Confidence Flash FEB
Sweden: Unemployment Rate JAN
Great Bratain: Public Sector Net Borrowing JAN, Retail
Sales YoY JAN and Retail Sales ex Fuel YoY JAN
Germany: PPI MoM JAN and PPI YoY JAN
United States: Core Inflation Rate YoY JAN, Inflation
Rate YoY JAN, Inflation Rate MoM JAN, Fed Mester
Speech and Kansas Fed Manufacturing Activity FEB

SPOT PRICES and one week change

OMXS30
NASDAQ
S&P 500
DAX 30
NIKKEI
HANG SENG
Gold spot
Crude Oil (Brent)
USD/SEK
EUR/USD
Bitcoin

1286,67 -2,27%
4 337,51 -0,59%
1 864,78 -0,81 %
8967,51 -3,43%
14 952,61
-11,10%
18 319,58
-5,02%
1 235,10 +5,29%
31,61
-7,36%
8,4122 -0,52%
1,1256 +0,88%
396,50 +5,44%

WRITERS
Olof Svanemur
Matilda Andersson
Tomas Nyln
Leo Dajaku
Jan Novotny
Sebastian Svensson
Technical Analyst
Carl Becht
OMX Stockholm 30

OMXS30 Make it or break it

OMXS30 is continuously trading in an uptrend.
However, the middle-long trend is steep negative. The
index just created a double top with a volume-correct
outbreak. The index reached its indicated target zone
at 1251 SEK where it currently is trading. Momentum
as well as RSI is diverging with the index price which
indicates a short-term kickback. RSI is slightly
oversold. However, it is a make it or break it situation
for the index in technical terms due to the
ferociousness of the negative middle-long trend and if
the index price would go below 1251 SEK it would be
very bearish. Support lines below 1251 are 1122 which
is essential. A stop loss could be placed beneath this
support line. We are slightly positive in the short term
whilst we are slightly negative in the long term due to
the bearish appearance of the middle-long trend.

USD/SEK Spot

USD/SEK Uncertainty in a huge degree

Since our last update USD/SEK has been moving
between the support line at 8.35 and resistance line at
8.5. USD/SEK is very ambivalent and shows no real
trend. However, the long term uptrend has been
cancelled which indicates a less positive uptrend or a
trend reversal. USD/SEK created a Gravestone Doji
where the sellers are dominant which is bearish. The
ADX-indicator also shows that the short term trend is
downwards. The momentum is lessening which also is
bearish. However, we are at slightly oversold levels
which could indicate that after a possible downturn we
are due for an upward movement. A stop loss could be
placed beneath the support line 8.33 SEK. We are

negative in the short term whilst we are somewhat

negative in the middle-long- and long term due to an
increasing downtrend.
Brent Crude

Bearish setup in Brent

Brent has been trading in a constant downtrend. The
reversal patterns are very weak and rarely achieve
their likely target zone which displays a technical
weakness. Recently Brent has been recently trading at
new lows below 30. Here oil found a bottom at 28 SEK
which can be used as a stop loss level. Brent has a
neutral RSI and MACD has just released a sell-signal.
ADX-indicator is inclined to agree with an indicated
bearish movement in the short-term. It just completed
a flag formation with a bearish retracement with a
target zone at 25 SEK. In total we see a very bearish

setup and new lows are likely. We are technically

negative in the short-, middle-long and long term.
EUR/SEK Spot

short-term, somewhat positive in the middle-long term

and we remain technically positive in the long term
due to the consistent uptrend.
AGES Industri

EUR/SEK shows great promise

EUR/SEK is trading in an uptrend currently and further
upward movement is indicated. At levels above 9.5
EUR/SEK have great resistance lines which it has had
trouble passing historically. It recently had an outbreak
from an inverted head and shoulders formation with a
target zone at 9.6 where it kickbacked. EUR/SEK is
according to RSI heavily overbought whilst the
momentum as well as the ADX-indicator shows that
the price is overheated. This indicates a short-term
downtrend. A downwards movement towards the
support level 9.43 is a likely outcome in the short-term
future. A stop loss could be placed beneath the
support line 9.25. We are technically negative in the

AGES Good risk/reward in the short term

AGES Industri is trading in a downtrend. However, the
stock has tested historical support lines at 100 SEK
which are very strong due to being tested frequently in
the past. This led us to believe that currently the
upside in the stock is quite big whilst a tight stop loss
could be placed beneath 100 SEK to ensure no large
losses. The stock is oversold according to RSI and
MACD is positioned close to the signal-line which
issues out a buy-signal when crossed. The stock has
also had a negative volume balance in the recent
drawbacks which indicates that the sellers are not

united and a few sellers are willing to go down in price.

We are technically positive in the short term; however
we remain quite negative in the middle-long- and long
term due to the existing downtrend.
Ambia Trading Group

Ambia Trading Bearish momentum

Ambia Trading Group has recently tested levels at 22
SEK. Here the stock creates enormous upside tails on
the candlesticks which indicates that the sellers are
very aggressive and consider the stock expensive at
these levels. The stock is currently trading above the
trend channels floor which provides two options; Either
a kickback or a huge downwards movement to test
support lines between 9-13 SEK. The momentum is
decreasing and MACD will most likely issue a sellsignal by crossing the zero-line. The stock is according
to RSI neutral which is consistent with a bearish setup.
14.9 SEK however is a very strong support line and
could prove difficult to break. We are slightly negative
in the short-term while we are somewhat positive in
the middle-long and long term.