Vermilion Compass: Weekly Equity Strategy
Key Points:• Bullish big picture. Our outlook remains positive, for reasons we have highlighted extensively in recent reports: improving foreign markets, tech's continued leadership, FANG's still-intact leadership, financials trading near 52-week highs, etc. With that in mind, below we list out conditions that would reverse our bullish outlook. Consider this a “time to get defensive†checklist:
1. All major indices violate their 200-day moving averages.
2. Financials start to break down to 52-week lows en masse. Right now, small cap banks are weak, but large-caps remain intact, and insurers, electronic exchanges, and i-banks continue to advance.
3. Tech, a long-term leader, exhibits a bearish price and relative strength trend reversal. FANG, too.
4. Foreign markets produce confirming breakdowns, especially emerging markets, the YTD leader.
5. The Russell 3000's advance-decline line bearishly diverges from the index's price advance. To be sure, breadth is far from perfect right now (blame small caps), but this has yet to translate into index-level breakdowns.
• Pullback opportunities in Tech. Many semis and software stocks have relieved their overextended trends, pulling back to support and presenting attractive entry points... see pages 8-20
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Adobe is a software company. The company provides a line of products and services used for creating, managing, delivering, measuring, optimizing, engaging and transacting with content across personal computers, devices and media. The company's segments are: Digital Media, which provides products, services and solutions that enable individuals, teams and enterprises to create, publish and promote their content; Digital Experience, which provides a platform and set of applications and services through Adobe Experience Cloud; and Publishing, which contains products and services that address market opportunities including eLearning solutions, web conferencing, web application development and printing.
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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