Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTURE... see page 2• Bullish and extended. The market's trajectory remains bullish. A variety of observations support this, ranging from leadership in cyclical sectors to improvements overseas. But as positive as the trend is, it is breaching extended territory. For instance, the S&P 500 is trading 8% above its 200-day moving average--the highest reading in nearly three years. A reason to sell? No. Instead, a reason to watch for a pullback opportunity to accumulate.
• Mid > Small > Large Cap. Small and mid caps continue to lead despite short-term weakness. Mid caps = sweet spot.
• Value > growth. The value/growth ratio is working through a multi-month correction—blame energy, credit biotechs—but “big picture†trends still favor value.
U.S. SECTORS... see pages 2-4
• Overweights: Energy (RYE), Financials (RYF), Industrials (RGI), Materials (RTM), and Tech (RYT). Of these, energy depicts a timely pullback opportunity.
• Underweights: Consumer Staples (RHS) and Utilities (RYU). Their price patterns depict attractive trends, but relative strength continues to point south.
• Health Care: The sector is exhibiting near-term strength, and individual industries like biotechs and medical devices are breaking out. Increase exposure.
U.S. INDUSTRIES... see pages 5-11
• Buy recommendations: Oil services (OIH), transports (XTN), shipping (SEA), home construction (ITB), medical devices (IHI), biotechs (XBI), and health care providers (IHF).
INTERNATIONAL EQUITIES... see pages 12-13
• Improving. Though all-time highs remains the exclusive claim of the S&P 500, overseas technicals continue to improve. Both developed and emerging market indices are breaking out from cyclical base patterns. Of the two, developed markets still have a slight technical edge relative to EM, with Japan (DXJ) continuing to outperform. That said, EM contains pockets of leadership, including Latin America and Eastern Europe.
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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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