Brief Technical Analysis: U.S. Equity Strategy: Growth Surging Relative to Value and more

In this briefing:

  1. U.S. Equity Strategy: Growth Surging Relative to Value
  2. Sunny Optical Sell into Pattern Resistance
  3. Softbank Short Targets and Re Cycle Reaction Support
  4. USD Moving into a Cycle Low in Asia Aligning with an Equity Rally Stall
  5. U.S. Equity Strategy: Bullish Outlook Intact

1. U.S. Equity Strategy: Growth Surging Relative to Value

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As we head into Q4 earnings season we remain bullish on the broad market. Our bullish outlook is supported by the themes highlighted in this report.  In addition, we highlight attractive Groups and stocks within Discretionary and Technology: Casinos & Gaming, Large-Cap, Semiconductors, Mid-Cap, Semiconductors, Small-Cap, Software, Design Solutions.

2. Sunny Optical Sell into Pattern Resistance

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Sunny Optical (2382 HK) shows a number or reliable topping signals in the form of a rising wedge top, non confirmation of new price highs and it’s historical lead cycle to HSI peaks and troughs. The topside of this wedge marks the ideal sell zone. Given the sharp rally spike we are keen to short for a quick swing lower and then re set or layer into the 150 area.

Rising wedge patterns have a 70% probability of breaking to the downside but when combined with bear divergence (indicator non confirmation of recent new highs) odds rise toward 85%. This set up mirrors the early 2018 cycle for Sunny Optical but in a more concentrated manner.

Lower wedge support rests at 130 and the level to break do induce a decline toward targets at 120 and 105. 

RSI divergence and the rising price wedge is a compelling short set up and also warns of a key HSI top taking shape in January.

3. Softbank Short Targets and Re Cycle Reaction Support

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Softbank Group (9984 JP) rally off of 9,100-200 support is moving into intermediate resistance amid RSI lofty reading and brewing bear divergence that sets up a short trade to tactical support followed by upside re test in Q2 a marginally higher levels to form a higher degree cycle peak.

Rally volumes have improved but starting to taper off into recent strength and we need to see buy volume deteriorate into short term strength to support a bear/short case.

RSI overbought readings above 70 with non confirmation bear divergence of recent new price highs is a topping signal.

The short trade lines up near 5,100/300 for a tactical pullback with 4,300/600 supports targeted. Macro support lies at 4,100. Above 5,300 would represent a breakout and reach for 2019 highs.

4. USD Moving into a Cycle Low in Asia Aligning with an Equity Rally Stall

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USD/KRW gunning to test 1,153 triple lows. USD/SGD met 1.3450 for a wave 5 low and USD long with risk of a re test. AUD and INR favored USD macro bull plays. USD shorts focused in PHP (bear wedge), IDR (macro triangulation key break down from major support). USD/MYR and USD/TWD working into USD long territory.

USD/JPY’s rising wedge break support and re test of resistance axis is a key inflection for risk in Asia and the globe.

DXY upturn off of lower wedge support with bigger price support near 96.00. MACD triple base low places a fairly good floor for now (USD base support) and a must hold level. MACD break of macro support would usher in a more bearish USD cycle and will act as a key inflection point. DXY price wedge favors the upside as long as 96 support is maintained.

5. U.S. Equity Strategy: Bullish Outlook Intact

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Amid rising Middle East tensions, investors have moved to safe-havens including Treasuries and gold, all while having a muted effect on the US equity market. At this point in time, the rising tensions have done virtually no damage to the bullish trends and indicators that continue to dominate the market. In today’s report we highlight attractive Groups and stocks within Manufacturing, Services, Technology, and Transportation: Aero Defense, Large-Cap, HR & Employment Svcs, Large-Cap, Optical Equipment, and Shipping, Energy

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