Brief Technical Analysis: Indonesia Bull Wedge Targets New Highs and more

In this briefing:

1. Indonesia Bull Wedge Targets New Highs
2. Nikkei Pressing on Intermediate Rejection Resistance
3. Lower Yield and a Firming USD
4. Naver Faces Macro Downside Pressure
5. U.S. Equity Strategy: Be Long & Carry On

1. Indonesia Bull Wedge Targets New Highs

We have held a bullish/long position in Indonesia from 6,080 after the breakout above 6,000 resistance and continue to see the macro cycle in a positive light to challenge and clear the 2018 highs.

Bull energy is brewing once again for a bull breakout of the noted wedge that will open the way for the macro bull cycle to resume. Lower wedge support is our preferred buy zone to add to our long position with clear wedge breakout resistance and bull inflection point.

For those not long this offers an excellent risk to reward entry with a controlled stop.

Buy volumes remain healthy and supportive of the macro bull cycle.

Indonesia is our top pick within SE Asia.

2. Nikkei Pressing on Intermediate Rejection Resistance

Japan has been a favored pair short bet against the likes of China. The standout chart feature is the rising wedge break of support and reaction rise to test the elevated underside of this trendline (backswing resistance). Very often backswing resistance points are not surpassed and act as a cycle turn point. Yesterday’s Nikkei price reversal favors this outcome.

We anticipate risk appetite to exhaust for US equities and the China complex once a trade deal is locked in (with drawn out conditions for the market to digest). This would leave the fragile Nikkei technical posture vulnerable to a hard correction cycle. The overall major trend still remains down for Japan (and Korea) unlike China.

A higher conviction USD/JPY peak will unfold at noted RSI and MACD resistance points that are expected to make peaks and a bearish turn cycle.

3. Lower Yield and a Firming USD

The break down in the 10yr yield from the sub 3% level has set in motion a higher degree decline in yield on the back of the rising wedge support break. We have met our 2.62% and 2.40% targets and see further weakness in yield.

Macro yield cycle will succumb to bear pressure stemming from the weekly MACD breaking down out of not one but two triangle formations (multi year event). The Bond market is sending a clear growth message with equities paying little head until after a trade deal is clinched.

USD flat range sets the stage for a bullish break higher barring a breach of dual lows at 95. Lack of a downside impulse sets a more bullish undertone for the dollar amid falling yields. Stress fractures in the bond market and USD are evolving.

USD is expected to base versus EM FX as the bulk of USD weakness in EM is behind us.

4. Naver Faces Macro Downside Pressure

Naver Corp (035420 KS) is nearing tactical support for a trading buy but continues to face macro bear pressure stemming from key resistances note in the weekly RSI and MACD postures. This bear pressure is due to resume after a bounce sequence.

Naver has broken down out of triangulation after completing a corrective bounce cycle outlined in our recent update. Naver Bull Wedge to Trade Higher . We are now resuming the macro down cycle and view tactical rallies as selling opportunities as the major trend remains down.

A Kospi 200 rise above 290 will play a role in lifting Naver in the outlined tactical bounce cycle.

5. U.S. Equity Strategy: Be Long & Carry On

Both the cap- and equal-weighted S&P 500 are trading at highs not seen since early October 2018 – a positive indication in itself. Additionally, key risk-on areas we highlighted in last week’s Compass (small-caps, Financials/Banks, and Transports) have outperformed off the recent lows – a welcomed sight for risk sentiment, and confirms out positive outlook. In today’s report we highlight attractive bottom-fishing opportunities within the Financials Sector, and attractive Groups and stocks within Large- and Small-Cap Railroads, and Internet Software