In this briefing:
- Dollar Yen BIG Short Phase II
- U.S. Equity Strategy: Oversold Rally Continues
- Samsung Bear Targets Coming into Focus
- Naver Bull Wedge to Trade Higher
- Japan Bank Index Bearish Head and Shoulders
1. Dollar Yen BIG Short Phase II
Major top and short call at USD/JPY 114 and flash decline did have a direct impact on a risk assets and the Nikkei in line with our S&P and Nikkei short calls. The second phase of USD/JPY weakness will usher in the next downturn in risk assets in late Q1 after some tactical posturing. We do view SPX 2,600 as a good level to re cycle shorts with some range work in store for February.
High degree divergence is still not fully unwound and implies the USD/JPY is set for a new low and part of phase II of the pain trade. Japan’s Crowded Long Faces Exodus Pressure . Japan Bank Index Bearish Head and Shoulders .
JPY crosses versus the AUD, GBP and Euro are currently nudging up against key resistance points that represent an interesting pivot point to stage a fresh decline (good risk aversion barometers).
We are seeing the knock on effect in Asian FX.
USD/JPY will surpass our original downside target of 108-109.
2. U.S. Equity Strategy: Oversold Rally Continues
A combination of, optimism surrounding U.S.-China trade talks, and Fed Chairman Powell’s comments have led to a continuation of the oversold bounce which began on 12/26, and the S&P 500 is now trading just below the 12/19 pre-Fed rate hike area. ~2,350 on the S&P 500 remains the support level to monitor. A retest of this low remains the most likely scenario, though it is far from a guarantee due to the potential for a “V” reversal. We examine an array of factors leading to our intact cautious outlook, and highlight attractive set-ups within Consumer Discretionary and Health Care Sectors.
3. Samsung Bear Targets Coming into Focus
Samsung Electronics (005930 KS) bear call from 50k has rewarded with a series of short trades with the most recent short from 46k and has sliced through support at 39,500. Impulsive nature of the decline tell us a key low will take more time to take shape.
SEC is pressing on critical relative support versus the Kospi. A break would send ripples through the broader market in terms of the direction bias. Kospi has already spent far too much time below the macro pivot barrier at 272k for signs of any immediate recovery. Risk lies with a downside overshoot below 250 support for the Kospi.
SEC is completing a minute full wave count down that sets up a counter trend bounce which is tradable but the major low remains elusive. We outline probable downside targets in late Q1/Q2, upside cap into Q3 and the more strategic buy support.
4. Naver Bull Wedge to Trade Higher
After an impulsive rise from the 110.5k dual bottom, Naver Corp (035420 KS) has formed a bull wedge that is expected to see a nice rally and perform over the Korean market.
RSI also shows a compelling set up for a rise.
Buy volumes are starting to improve and supportive.
Targets are 8% and 14% higher from current levels.
Macro pivot resistance will cap rally attermpts in Q1.
5. Japan Bank Index Bearish Head and Shoulders
Japanese banks telegraphed the Nikkei plunge as did our insight on the USD/JPY Dollar Yen BIG Short/Inflection Level and Targets .
We flagged a bearish Nikkei cycle in Japan’s Crowded Long Faces Exodus Pressure.
Japan bank index exhibits are very clear bearish head and shoulder pattern that broke neckline support and will offer a great short into a bounce for further weakness. This warns of further deterioration in the Nikkei post uptick.
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