This weeks headlines

Is the USA at risk of entering a recession?

Keep a close eye on the Riksbank
Buy the dip or sell the rally?
The search for safety
Oil and Gold rally, volatility remains elevated

WEEK 5

Is the USA at risk of entering a recession?

The global currency war continues to escalate and those
countries that do not participate in the war are negatively
affected. In Europe, Draghi continue to depreciate the Euro
and the Bank of Japan has depreciated the yen for years.
Recently China entered the currency war and started to
depreciate their currency in response to a slowdown in their
economy. The stronger US dollar negatively affects the United
States and a recession has become much more likely in recent
months.
In the fourth quarter the USA only grew at a rate of 0,69% year
over year. It is likely that the US manufacturing sector is
already in a recession. According to CNBC the US
manufacturing index (ISM) recently registered at 48,2 , the
lowest levels since 2009. The ISM index is currently signaling
that the manufacturing sector is contracting and this
contraction raises the risk of a US recession in the coming 6-9
months.
Optimists say that manufacturing is a tiny part of the economy
and that the United States can withstand the effects of a
stronger dollar and a slower global growth rate. Optimist also
think that the lower price of oil is positive for consumers and
that savings at the pump will translate to higher spending
elsewhere in the economy.
Pessimists, on the other hand, say that historically the
manufacturing sector has been a good indicator of more
problems to come. Typically one of the first signs of a
recession is a weakening manufacturing sector, which then

transfers its problems to the rest of the economy. Inventories

have continued to increase in the USA and companies will
have a hard time to sell their inventory without material sales
increases. Every recession since 1919 has coincided with an 8
month decline in industrial production and currently industrial
production has declined for 10 straight months in the United
States.
It is possible that historically reliable indicators of a US
recession have become obsolete. Perhaps the US economy has
changed so substantially that the old indicators have become
less reliable? Perhaps the recession will be contained and
isolated to the manufacturing sector? The future remains
uncertain, but the risk of a recession has certainly increased
markedly in the last 3 months.

Sweden

Keep a close eye on the Riksbank.

After what has been a turbulent start to the New Year, the
OMXS30 bulls managed to rally the Swedish large cap index into
positive territory before the week ended thanks to last Fridays
rally. Currently trading at around 1350p the index is down 20%
from its peak in April. The market seems unsure of whether
things are cheap right now cause of all the central bank
stimulus that is sure to follow, or if the market is grossly
overvalued cause of all the bad economic fundamentals. The
Riksbank has hinted strongly that they will intervene in the
exchange market if the Krona appreciates, and the Riksbank can
now intervene at any point in time (not limited to policy
meetings). The promise of further accommodative central bank
policy in Sweden combined with the fact that the OMXS30 is
down about 10% more than the major U.S indices makes a
compelling case for Swedish stocks in the short horizon. A lot of
manufacturing numbers are being released today (Monday), and
investors will have a chance to compare how the Swedish
manufacturing sector stands in comparison with global peers.
Investors has to tread lightly, there is no assurance that a better
than expected PMI number will be positive for Swedish stocks, a
bad number might actually be better since this would increase
the likelihood of a rate cut from the Riksbank at its next policy
meeting.

Stocks

Buy the dip or sell the rally?

As bearish sentiment looms over global stock markets, the buy
the dip mentality of recent years seems to have faded with the
old bull and so far in 2016 the average investor has looked to sell
on the rallies instead. CEO of the largest company on earth - Tim
Cook is now seeing extreme market conditions everywhere,
quite the opposite of what he said a couple of months ago when
he sent a letter sent to Jim Cramer as he tried to calm investors
over Apples China-sales. Cook is not alone in taking a more
defensive approach to the economy; in fact hes late to a party
already attended by names such as George Soros and Carl Icahn.
Soros who recently came out saying hes observing a hard
landing in China as he was speaking at the global economic
forums in Davos and Icahn released a video late September titled
troubles ahead. According to Bill Ackman the theory of markets
being efficient has caused people to buy big indices instead of
picking stocks themselves. Ackmans reputation has taken a toll
in recent months after being one of the biggest cheerleaders for
Valeant Pharmaceuticals before they lost more than half of its
value due to bad accounting principles. However, this metaanalysis of the current market condition is quite interesting. If
Ackman is right, there is value to be found in stock picking
companies which are too small to be traded in an index.

Bonds and Forex

The search for safety.

You will have to glance far back in time to find a more faulty
January than this years. Markets have wobbled fiercely and created
a certain nervousness among investors. In this insecure market
environment there is now a willingness to pay to save. That is, the
yield is negative for several safe corporate bonds. The premium
for junk bonds has at the same time risen, and so has the credit
spread. Even though the spread increase is quite modest in
comparison to Lehman-crash levels, it still says something about the
market sentiment. Chinas management of its economy, and the
governments choice regarding state-control versus liberalization, is
at the moment factors that significantly affect the global market
mood. The Chinese government is still holding on to the semi-fixed
exchange rate and continues to buy Yuan to prop up its value. Even
though the Yuan lately has depreciated slightly against the dollar,
and despite the devaluation in august the trend indicate that the
Yuan is overvalued against the dollar. The growing difference
between the official and the offshore value of the Yuan further
reinforce that indication and it triggers expectations of a future
depreciation. A mispriced currency, expectation of depreciation and
unclear rules regarding the management of the economy is
confusing for investors. In the long run, investors and regulators
demand loosening of the controls since it hinder predictability and
credibility. On the other hand would big steps towards liberalization
lead to a weakened Yuan, which at the moment would burden
many Chinese companies with increased cost of debt. That would
probably in turn trigger capital flight. With the markets stormy as it
is, now might not be the right time to rock the boat.

Commodities

Commodities are volatile, oil is rallying and gold is reaching new

highs.
It has been a very good week for oil, as it rebound 25 percent from
last weeks low. On Fridays trade, the 4 day rally closed with Crude
oil at 33.76 dollars per barrel and Brent oil at 35.91 dollars per
barrel. This rally has partially been fuel by Russias energy minister,
saying that Russia is ready to discuss with OPEC regarding a 5
percent oil production cut. A report from Bakers Hughes also
showed that U.S. oil drillers have cut rigs for six week straight,
bringing the rig count down to 498. However, there are still
concerns as a survey from Reuters showed that OPEC supply has
actually risen with 290,000bdp (millions of barrels per day) since
December. The supply rise has partially been due to Iran as its
sanctions were lifted, adding a new source of oil supply to the
market.
During Wednesdays trade, gold surged reaching a three-month
high at over 1,127 dollar an ounce. Since then, gold has dropped
and closed on Friday at 1,117.6 dollar an ounce. Much of this was
due to a report from the Federal Open Market Committee (FOMC),
saying it would keep the interest rates unchanged and that they
were closely monitoring the global economy. Since there was no
clear signal on how the U.S. Federal Reserve actually plan to
proceed with the rates, gold fell back. According to Commerzbank,
the future of gold is dependent on what the Fed decides in March.
A raise in the interest rates would have a negative effect on the
gold price, as this would keep the opportunity costs of holding gold
high.

OMX Stockholm 30

Brent Crude Spot

Support level can provide short-term buying opportunity.

OMX Stockholm 30 has after a prolonged upswing last year turned
down and been traded for the last nine months in a falling trend in
which the volume increased slightly during the last month. This can
give indications that the negative trend is strong and will continue
to be so. The index is traded at the moment in the lower part within
the trend channel, with a MACD below the signal line indicating that
the index is probably waiting for a positive reaction within the trend
channel. The index is currently testing the support level of around
1290 points and a stop loss is set tentatively slightly below this
level. The resistance level is around 1400 points. The technical view
of the OMX Stockholm 30 is positive in the short term while its
negative in the medium term.

Wait for the support level to hold before enter.

Brent Crude Oil has been traded in a negative trend for more than 1
year with limited support levels within the trend channel. MACD
just recently broke through the signal line, indicating that the
decline will continue. However, the RSI is at 18 which give
indications that the Brent Crude Oil might be slightly oversold at the
moment. It is traded close to the support level of $27 where it has
not been since 2004. The support level together with the fact that it
is traded in the bottom of the trend channel can potentially give a
rebound in the short-term. A stop loss is set tentatively slightly
below $27. The resistance level is around $ 44. The technical view
of the Brent Crude Oil is negative in the short- and medium-term.

USD/SEK Spot

USD Strengthening but displays signs of weakness

USD/SEK is in an uptrend but is trading more frequently in the lower
part of the trend channel. MACD just created a sell-signal by crossing
the signal-line from the upside whilst it currently resides close to the
zero-line which if crossed would create an additional sell-signal. The
trend in the short term is according to the ADX-indicator undefined.
USD/SEK is trying to break the resistance line at 8.6 SEK another time.
USD is constantly strengthening itself against the SEK but if the trend
would be reversed it could be very bearish and the closest support line
would be at 8.3 SEK. A stop loss or an enlarged hedge could be
initiated beneath this support line. We are somewhat negative in the
short- and middle-long term whilst we are somewhat technically
positive in the long term due to the continuous uptrend.

Gtenehus Group

Strong development provides additional upside

Gtenehus Group has since beginning of 2015 been traded in a
positive trend. During the previous week the stock broke through
the ceiling of the trend channel during high volume as it the same
time broke through the previous resistance level of 3 SEK which
gives a signal to buy the share. However, the MACD just recently
crossed the signal line from above which may lead to a short term
downward recoil. If the stock manages to establish above the level
at 3 SEK, then this could be seen as a new support level. If not, then
the stock has stronger support level at 2.4 SEK. A stop loss
tentatively set slightly below this level. Resistance is found at 3.4
SEK. The technical view of Gtenehus Group is positive in the shortand medium-term.

G5 Entertainment

Neurovive Pharmaceutical

Return to previous highs likely

G5 Entertainment has currently been trading at levels over 50 SEK.
On these levels the stock boasted many sellers who have sent the
stock down to 37 SEK by creating a double-top formation as well as
a negative GAP where the sellers are very desperate. 37 SEK is
seemingly a very strong support line however and the stock has
recovered from its recent decadence. MACD is closing in on the
signalline from beneath which could trigger a buy-signal. The stock
is oversold according to RSI and the stock is very likely to recoil
towards recent highs. Volume has been diverging in the recent
downtrend which displays weakness amongst the sellers. A tight
stop loss could be placed beneath the support line 37 SEK. We are
technically positive towards the stock in the short-, middle-long and
long term.

Neurovive Pharmaceuticals = High risk, high reward

Neurovive has been trading in a downtrend. The stock is very
eventful and sellers have showed themselves clearly several times
by creating a triangle formation recently as well as a drastic
negative GAP. The stock has seemingly found a bottom at 7.4 SEK
and worked itself upwards again to previous lows. Currently the
stock is trading in a rounding bottom formation which indicates a
reversal in long-term trend. However, MACD has produced a sellsignal by crossing the signal-line from above which is very bearish
and indicates that the stock will lose its momentum. The stock is
slightly overbought. On-balance volume displays that the buyers are
united which strengthens the uptrend. We propose a tight stop loss
beneath the support line at 8.9 SEK. We are slightly negative
towards the stock in the short- and long term, whilst we are
somewhat positive in the middle-long term.

Odd Molly is a Swedish clothing brand exclusively focused on womens

clothing. The company is established globally, with Sweden as their most
important market. Odd Molly reaches its customers mainly through
external retailers though, during 2015 and going forward, the companys
strategy is to increase the number of Odd Molly stores which solely carries
Odd Molly merchandise. The purpose of this strategy is to increase brand
awareness and sales by combining it with appealing brand concepts.
Global growth is a goal highly prioritized by the company. To reach new
markets and more customers Odd Molly have during 2015 incorporated
franchise-concept to further their reach. Odd Molly experienced a sharp
drop in sales during the years 2011 and 2012. Since then the company has
managed to turn the trend around and there is reason to believe that the
growth, that long was the companys hallmark, is back. Odd Molly did
during 2015 reach a profit increase of 200 % y/y coupled with increase in
revenue. The EBIT margin is 6% compared to the company goal of 12%
and the all-time high of 25%. This is mainly caused by heavy investments
in marketing and new retailers. The company policy is to pay 40% of the
profits as dividend.
KnowIT is a Swedish Consulting firm primarily focused on IT, digital and
design as well as management consulting. The company was founded in
1990 and has over 1800 employees. The primary markets are Sweden and
Norway with 15 and 5 offices respectively. KnowIT has also got offices in
Helsinki, Bremen and Tallinn. The company has since 2011 experienced
worsening margins every year. However during 2015 this trend was
broken and the margins increased slightly to 5.9 % due to effectivity
measures. The overall sales also increased during 2015 which resulted in a
revenue increase of 8.5%. KnowIT have got lower margins and average
revenue growth compared to its publicly traded competitors. One
advantage for KnowIT is that its business is spread over different

industries and to a large extent consist of long term framework

agreements with the public sector. The positive outlook for the Swedish
economy with estimates of 3% GDP growth the coming years works in
favor for KnowIT since Sweden is the companys most important market.
KnowITs market is estimated to grow faster than the underlying
economy. KnowITs goal is to grow faster than the market which is a
challenging goal that would mean having to increase market share. The
dividend for 2016 is estimated to be 5.7%.
Lucent Oil is an oil processing company that works with the cleaning and
recycling of oil. They are currently the only company in the world with the
capacity to clean oil down to 1 ppm. In 2015, the EU tightened the
requirements for cleaning to now be below 3 ppm, which puts Lucent Oil
in an advantageous position toward its competitors who have yet to reach
these levels. It is deemed very likely that the environmental requirements
will persist or be tightened further, which would increase the demand for
Lucents products and allow them to expand to new harbours. Currency
risks are palpable, but the management states that they are actively
working with reducing this risk via derivatives. Therefore the single
highest risk factor is the low free float which results in relatively big
spreads, sometimes up to 5% of the stock price, and a volatility as high as
110%. Oil prices naturally have a big impact on the company and add both
down-side and up-side potential. Even though there is a high probability
of around 4 million warrants being exercised in June this year, which
would increase the total amount of stocks by 26%, this dilution effect is
expected to be offset by the opportunities of higher dividends due to big
accumulated cash flows. Even in the stagnation scenario, Lucent is still
expected to yield around 4,5%.
Gtenehus Group AB is the parent company in a concern focused on
house construction and development. Coming out of a period of red ink,
2016 could be an interesting year for the stock. An expected growth of
about 15% in the market for smaller housing during 2016 has been

estimated by Boverket (the National Board of Housing, Building and

Planning). This, together with the fact that the company has started
recruiting again after a time of cutbacks, and that important insiders are
buying up on the stock, indicates that there is strong belief in a growing
market for smaller housing. Gtenehus has also been amortising
comprehensively during the last couple of years, creating up-side
potential. If amortisations end in 2017, it is not unthinkable that dividends
will be issued that year. There are some risk factors of political nature,
such as the proposed amortisation requirements. If these are realised it
could have a notable impact on the demand for Gtenehuss products.
High levels of debt make households vulnerable to fluctuations in the
economy, which also poses a risk to the company. With a history of
growth numbers below market average, a relatively high P/E value
compared to its peers suggest that a lot is expected from Gtenehus in
2016.

MACRO EVENTS WEEK 5

Monday:

Sweden: Swedbank Manufacturing PMI JAN

China: NBS Manufacturing PMI JAN and Caixin Manufacturing PMI JAN
Germany: Markit Manufacturing PMI Final JAN
Euro Area: Markit Manufacturing PMI Final JAN and ECB Draghi Speech
United States: ISM Manufacturing PMI JAN and Fed Fischer Speech

Tuesday:

Germany: Unemployment rate JAN

Euro Area: Unemployment Rate DEC
United States: Fed George Speech and Total Vehicle Sales JAN

Wednesday:

Japan: BoJ Monetary Policy Meeting Minutes, BoJ Gov Kuroda Speech and
Consumer Confidence JAN
Euro Area: ECB Non-Monetary Policy Meeting, European Commission
Forecasts and Retail Sales YoY DEC
United States: Adp Employment Change JAN and ISM Non-Manufacturing
PMI JAN

Thursday:

Switzerland: Consumer Confidence Q1

Great Britain: BoE Interest Rate Decision, MPC Meeting Minutes, Boe
Quantitative Easing, BoE MPC Vote Hike and inflation report
United States: Initial Jobless Claims 30/JAN, Unit Labour Costs QoQ
Prel Q4, Nonfarm Productivity QoQ Prel Q4, Factory Orders MoM DEC
Friday:
Germany: Factory Orders MoM DEC
Brazil: Inflation Rate YoY JAN
Russia: Inflation Rate YoY JAN
Canada: Balance of Trade DEC and Unemployment Rate JAN
United States: Average Hourly Earnings MoM JAN Average Weekly
Hours JAN, Balance of Trade DEC, Exports DEC, Imports DEC, Participation
Rate JAN, Unemployment Rate JAN and Non Farm Payrolls JAN.

SPOT PRICES and one week change

OMXS30
1356,32
NASDAQ
4 613,95
S&P 500
1 940,24
DAX 30
9 798,11
NIKKEI
17 518,30
HANG SENG
19 683,11
Gold spot
1 116,17
Crude Oil (Brent)
34,20
USD/SEK
8,5819
EUR/USD
1,0831
WRITERS

Olof Svanemur
Matilda Andersson
Sebastian Svensson

Technical Analysts:

-0,46%
-0,85%
-2,06%
+0,71%
+2,04%
+1,75%
+1,45%
+9,93%
-0,01%
+0,36%

Tomas Nyln
Mark Thingo

Leo Dajaku
Jan Novotny

Emil Ersbjrnsson

Carl Becht