Thoughtful insights and approachable analysis.

The case studies below highlight selective opportunities across regions and sectors, where improving technical momentum is being reinforced by solid fundamentals rather than speculative excess.

• Tencent's improving technical setup, with bullish EMA and RSI signals, is being reinforced by supportive fundamentals, including strong analyst conviction, buybacks, and Hong Kong tech's AI-driven rally, pointing to building upside momentum.
• Caterpillar's recent pullback after a strong year appears constructive, with bullish technical signals aligning with robust fundamentals, record backlog, and AI-driven power demand, supporting the case for further upside despite cyclical risks.
• Richemont's renewed bullish technical signals are being underpinned by strong fundamentals, including resilient sales, healthy margins, robust cash generation, and supportive analyst sentiment, suggesting the rally into 2026 is well-founded rather than speculative.

Quick Market Overview

US stocks brushed off geopolitical shock after the capture of Venezuela's President Nicolás Maduro, with the Dow Jones Industrial Average closing at a record high. Risk appetite stayed firm as energy, financials and cyclicals led gains, while volatility remained muted despite weaker manufacturing data. Markets ended the Santa Claus rally period with the Dow ahead, signalling confidence in the US growth outlook over geopolitical risk.

General Market Health (SPX500)

The SPX500 has begun 2026 on a positive footing. The index has formed a higher trough followed by a higher peak, confirming an emerging uptrend. The most recent higher trough (HT2) provides a base for the next move higher, and a break above the prior higher peak would further reinforce this bullish outlook. Momentum also remains supportive, with the RSI largely holding above 50 since late November. As long as the RSI stays above this level, underlying momentum should remain positive. In addition, the EMAs remain in a bullish configuration, with further steepening and widening signalling strengthening trend conditions. Caution would be warranted if price falls below HT2 and the RSI slips back under 50.

Potential Trade Setups

Tencent Holdings Ltd (TENC.hk)

Tencent's chart is showing encouraging signs. The EMAs have completed a bullish crossover (black circle), while the RSI has moved decisively above 50, signalling a shift to positive momentum. As long as the RSI holds above this level, momentum should remain supportive of price, while a move back below 50 would undermine the signal. The share price is also pressing against a downward-sloping black trendline, and a clear break above it would mark a further positive turn in momentum.

Beyond improving technicals, Tencent's fundamentals add support. Around 47 analysts rate the stock a Strong Buy, with consensus price targets implying roughly 19% upside, reflecting confidence in earnings and valuation. The call is reinforced by Hong Kong tech's strong 2025 rally, its best since 2017, driven by AI optimism, with Tencent a key beneficiary. Late-2025 share buybacks further signal management's confidence in the stock's value.

Caterpillar, Inc (NYSE:CAT)

Caterpillar has delivered a strong 12-month performance, rising around 70% over the period. The December pullback may now be offering a more attractive entry point. Technically, the EMAs have completed a bullish crossover and the RSI has moved comfortably above 50, suggesting that positive momentum is beginning to build. If the RSI can hold above this level, momentum should remain supportive of price, while a move back below 50 would weaken the signal. Further confirmation would come from the EMAs developing greater slope and separation, which would indicate a strengthening trend.

Caterpillar's strong technical setup is underpinned by solid fundamentals. Demand remains robust across core segments, notably energy and data-centre power generation, helping drive a 10% year-on-year rise in Q3 2025 sales to $17.6 billion. Backlog sits near a record $39.8 billion, offering clear revenue visibility. Analyst consensus remains a Buy, with further upside expected over the next year. AI-driven power demand is emerging as a structural tailwind alongside traditional construction and mining, suggesting the recent pullback could offer an attractive long-term entry despite cyclical risks.

Compagnie Financiere Richemont SA (SIX:CFR)

Richemont is up around 30% over the past 12 months and enters 2026 on a relatively strong footing. The EMAs have turned bullish, while the RSI, which has generally remained constructive since August last year, has moved back above 50, reinforcing the positive momentum backdrop. If sustained, this should be supportive of price, although the signal would be negated by a move back below 50. Further confirmation would come from the EMAs developing greater slope and separation, which would indicate that momentum is translating into trend strength.

Richemont enters 2026 with resilient sales, improving margins and strong cash generation supporting its share performance. First-half FY26 sales rose 10% at constant exchange rates to €10.6 bn, with momentum building into Q2 and broad-based demand across regions and categories. Operating profit increased 7% to €2.36 bn, margins held at a healthy 22.2%, and operating cash flow jumped 48% to €1.85 bn on better profitability and working-capital control. Net cash of roughly €6.5 bn gives ample flexibility, while jewellery houses led by Cartier and Van Cleef & Arpels remain the key growth drivers. With analysts broadly positive and targets edging higher, the rally appears grounded in fundamentals rather than excess.

Hot News, Cold Logic

The AI boom is setting the stage for a strong revival in IPOs in 2026, with heavyweight private firms such as SpaceX, OpenAI and Anthropic widely seen as potential candidates. After a solid rebound in 2025, analysts expect capital-hungry AI companies to increasingly turn to public markets to fund growth. If market conditions hold, a wave of large, high-profile listings could push IPO activity into a higher gear next year.

Final Thought

Markets open 2026 buoyed by easing-policy hopes and resilient earnings momentum, yet with valuations stretched and geopolitics unresolved, the path forward looks less about straight-line gains and more about selectively navigating volatility for opportunity.