Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTURE... see page 2-3• Bullish big picture. Long-term trends still tell a bullish narrative. Also, viewed from a global perspective, a trend change is underway, favoring foreign equities over the U.S., especially developed international markets.
• Equities > Treasuries & Commodities. Relative to Treasuries (TLT) and commodities (DBC), equities are rallying toward decade highs. We do not see signs of these trends reversing soon. Stay overweight equities.
• SMid > Large Caps (barely). The small/large-cap ratio (IWM/SPY), stuck in a YTD decline, is testing a key support level. We still favor small caps, but further weakness will prompt a change (i.e. overweight large caps).
• Growth > Value. No changes here -- growth continues to outperform. This is a global theme. And, though arguably extended--at least in the near-term--this trend has yet to show signs of reversing.
SECTORS... see page 4-6
• Overweights: Financials (XLF), Industrials (XLI), and Tech (XLK). Of the three, XLI represents a timely buy (based on relative strength). And, though still a market weight, health care (RYH, XLV) represents another buy.
• Financials: On review for a downgrade. Unless the 10-year Treasury yield rebounds soon, we will likely downgrade the sector to market weight.
• Underweights: Defense... Consumer Staples (XLP), Energy (XLE), REITs (XLRE), and Utilities (XLU).
INDUSTRIES... see pages 7-10
• Cyber Security (HACK): The bullish theme remains intact. One of the few, “unextended†trends within tech.
• Tech-Multimedia Networking (IGN): One of the better-looking monthly charts. Buy.
• Biotechs (XBI): Though they are not leadership within health care--that title belongs to med devices--biotechs are beginning to exhibit technical improvements. Buy.
• Health Care Providers (IHF): Breaking out from a two-year base. Buy.
INTERNATIONAL... see pages 11-14
• Overweight developed int'l. Led by Europe, developed markets are overtaking the U.S. as leadership. Overweight.
• Japan is breaking out. The TOPIX broke out last week from a cyclical base pattern. EWJ exhibits a similar pattern. Buy.
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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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