In this briefing:
- U.S. Equity Strategy: Nearing Short-Term Overbought Extremes
- US 10yr Triangle Geared for a Power Breakout
- Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues
- Petrochina Breakout and Laggard Play
1. U.S. Equity Strategy: Nearing Short-Term Overbought Extremes
Positive news surrounding trade and dovish Fed rhetoric has continued to flow, resulting in a reversal from December’s oversold extremes to our current, overbought extremes according to the S&P 500’s percentage of stocks above their 50-day moving average (see chart below). We continue to believe the market is going through a bottoming process, and we prefer to be on the cautious side at current levels considering how far and how quickly the market has risen.
In today’s report we highlight attractive stocks within Materials and Technology: large- and small-cap gold, silver, platinum, and optical equipment companies.
2. US 10yr Triangle Geared for a Power Breakout
Our macro stance touted a bearish yield scenario from 3.26% and again once below 3% with a target of 2.62% and has since been revised lower. Recent yield fade call from 2.80% targets much lower yields and will have a ripple effect globally.
A fresh plunge in yield would favor rate sensitive assets and warn of a harder slow down cycle. The bond market is pounding the table that global growth will slow more dramatically than what is currently priced into market and equities.
The offset is clearly a more dovish CB tone, China stimulus and closing in on sentiment capitulation.
Triangulation breakout will offer a powerful trade. Yields are set for a big move.
3. Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues
We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed. In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.
4. Petrochina Breakout and Laggard Play
Petrochina Co Ltd H (857 HK) has remains suppressed but with oil perking up there is a laggard upside play taking shape as we begin to see distribution in HK upside leaders. On weakness we like positioning on the long side and can be used as a pair with an index short or one of the steel counters.
Given stock leaders are showing deteriorating upside momentum, we expect laggards to attract more attention.
RSI and MACD breakout patterns outlined as well as the price breakout at 5.10.
A bigger descending wedge also shows promise as a secondary breakout trigger.
MACD pattern resistance will help define the trending capability post breakout.
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