Brief Technical Analysis: Lower Yield and a Firming USD and more

In this briefing:

1. Lower Yield and a Firming USD
2. Naver Faces Macro Downside Pressure
3. U.S. Equity Strategy: Be Long & Carry On
4. European Apparel, Accessory & Luxury Goods Stocks Are Heating Up — Add Exposure
5. Sony Trading Low Just Above Higher Conviction Intermediate Buy Support

1. 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.

2. 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.

3. 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

4. European Apparel, Accessory & Luxury Goods Stocks Are Heating Up — Add Exposure

We continue to believe that equities in Europe and the UK are bottoming with the STOXX Europe 600 index breaking topside its 14-month downtrend. Helping lead the turnaround is the Personal & Household Goods supersector. We believe outperformance is set to continue and several stocks are actionable at current levels within our int’l Group CD-28 Apparel, Accessory & Luxury Goods, Europe: LVMH Moet Hennessy Louis Vuitton SE (MC-FR), Christian Dior SE (CDI-FR), Kering SA (KER-FR), Hermes International SCA (RMS-FR), adidas AG (ADS-DE), Moncler SpA (MONC-IT), PUMA SE (PUM-DE), and Bjorn Borg AB (BORG-SE). Add exposure.

5. Sony Trading Low Just Above Higher Conviction Intermediate Buy Support

Sony Corp (6758 JP) is forming a bullish descending wedge/channel that once mature will chisel out an intermediate low with scope to clear medium term breakout resistance. The tactical low near 4,400 lies just above more strategic support.

Clear pivot points will help manage positioning within the bull wedge that is in the final innings.

The tactical buy level is not that far from strategic support with a more bullish macro lean.

MACD bull divergence is not only supportive into near term weakness but also points to a breakout above medium resistance. Risk lies with Sony not looking back after hitting our tactical low target.