Vermilion Int'l Compass: Global Equity Strategy
Many major indexes have broken below critical supports, including MSCI ACWI (ACWI-US), EURO STOXX 50, STOXX Europe 600, and the DAX. While we want to be on the lookout for possible false breakdowns, the odds suggest a bearish downside continuation, and a bearish outlook is appropriate as long as the YTD downtrend remains intact on the ACWI-US, MSCI ACWI ex-US (ACWX-US), and EAFE (EFA-US). There is bounce potential given these broad global indexes are testing their respective downtrend channel supports, but the fact remains that they are in downtrends, which remains a major problem longer-term. As a result, any bounce would likely just be a short-term trading opportunity... see charts below. Japan, India, and Brazil display some price deterioration, but they remain our favorite places to invest with RS uptrends intact.U.S. Dollar (DXY), Global Sovereign 10-Yr Yields, Commodities. We continue to monitor for breakdowns from topping patterns on at least two of these three -- the DXY, global sovereign yields, and commodities (esp. crude oil) -- something we believe is required in order for global equity markets to establish a reliable bottom. The Bloomberg Commodity index (DJP-US) is now testing $32.50, and a break below it would confirm a major top. Additionally, while it is far too early to declare topping patterns on global sovereign yields and the DXY, the 10-year Treasury yield and DXY both formed bearish engulfing patterns yesterday (Wednesday). At the very least, this could set the stage for a near-term top in yields and the DXY, would help support at short-term rally for the broad global equity indexes.
Actionable Theme: Consumer Staples. Consumer Staples is really the only pure defensive Sector, and it currently offers an attractive place to hide during this ongoing bear market. The bulk of today's Staples recommendations are from Japan, with a few from Europe and emerging markets -- add exposure... see pages 2 and 4-10.
Actionable Theme: Technology & Consumer Discretionary. We continue to see some attractive names within these growth Sectors... see pages 3 and 10-13.
Grupo Bimbo is a holding company. Through its subsidiaries, Co. is engaged in the production, distribution, sale, and export of bread, cookies, cakes, snacks, tortillas, potato chips, chocolates, and confectionery products. Through its subsidiaries, Co. organizes its businesses in two divisions as follows: the bakery division and the appetizers, salads, confectionery and pastry divison operated by Bimbo S.A. de C.V., and Barcel S.A. de C.V., respectively.
Tiger Brands is a manufacturer of branded food products. Co. provides a range of categories spanning food, home and personal care products. Co. operates through:The Grains division, which includes maize and wheat milling, bakeries, sorghum beverages and breakfast, rice, oats and pulses, and pasta; The Consumer brands division, which provides groceries, snacks and treats, beverages, value added meat products, out of home, home, personal care and baby; The Exports and International division, which includes, among others, Tiger Brands International Langeberg & Ashton Foods, and Chocolaterie Confiserie Camerounaise; and Nigeria business, which comprises of Deli Foods and Dangote Flour Mills.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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