Vermilion Compass: Weekly Equity Strategy
THEMES• Bullish big picture. Our bullish outlook, pre-dating last year's Presidential election, remains intact.
• The Financial Sector is setting up for a breakout. The XLF, for one, is nearing a breakout from a 5-month base, with relative strength close behind. Individual Groups exhibit similar patterns, especially regional banks, investment banks/brokers, insurers, and asset managers. In today's report we highlight actionable charts in the latter three Groups, including names like AMP, AMG, EV, APO, SF, EVR, PRU, AFL, and LNC... see pages 3, 9-30
• Metals Groups are bullishly inflecting -- buy. Global mining stocks are bullishly inflecting following 6-month corrections to their 200-day moving averages. This is visible in our Aluminum (AA), Copper (SCCO), and Steel Groups (RIO). The underlying metals are also reversing long-term declines. Additional tailwinds are visible in: (1) a declining dollar; (2) breakouts in commodity currencies; (3) a long-term reversal in the global materials sector's relative strength trend; and (4) a breakout in EM's relative strength (vs. EAFE)... see pages 4-5
• Stay overweight Tech. Tech took back the top relative strength ranking last week from Health Care. However, unlike Health Care, it is a mature leader, characterized by extended trends (semis), and few developing breakouts. That said, we remain overweight until Tech's long-term advance reverses... see page 2
• Signs of a near-term bottom in Energy: Energy is a laggard, still scraping the bottom of our relative strength rankings, but it is showing signs of a near-term bottom. Bullish momentum divergences are visible in many individual charts, including the XLE. And a select number of names, including CVX, are bullishly inflecting. We view this as a trading opportunity; for an optimistic, long-term view, we need to see reversals in relative strength downtrends. Something we are watching.
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Aflac, through its subsidiaries, provides financial protection to people worldwide. The company's principal business is supplemental health and life insurance products. The company's insurance business consists of two reporting segments: Aflac Japan, which are designed to help consumers pay for medical and nonmedical costs that are not reimbursed under Japan's national health insurance system; and Aflac U.S., which the insurance products to provide supplemental coverage for people who already have primary medical or primary insurance coverage. The Aflac Japan's insurance products includes of cancer insurance, and medical insurance; and Aflac U.S. products includes of accident insurance, among others.
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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