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Vermilion Macro Vision: Materials Sector Synopsis

Materials Sector: Overweight. Leadership in this Sector is becoming more oriented to stock picking after experiencing a very strong rally off the February lows. We continue to believe the current pullback in many names is normal at this juncture after suffering a steep, bear-market decline over the last several years. Steel stocks have reversed their near-term downtrends and many remain long-term bullish. Names such as: NUE, STLD, X, WOR, CMC, AKS, SMSMY, and SCHN remain attractive and should be bought on any weakness. Many of the chemical companies continue to exhibit bullish technical patterns, and the recent strength in many of the large caps is a welcome sight. Names we find technically attractive include: BASFY, DD, DOW, LYB, EMN, CE, FMC, and HUN. Many of the small-cap chemicals continue to exhibit bullish technical patterns, and we would be buyers on any pullbacks including: WLK, MEOH, CBT, BAK, SHI, OEC, CC, UNVR, BCPC, CHMT, NGVT, KWR, IOSP, IPHS, TROX, and KMG. Many of the paper-related stocks have also become appealing, as many positive inflections are taking place. Names we like in this space are EVA, PKG, WRK, KS, NP, SWM, ITPOF, and VRTV. Our Group. MA-18 Forest Products, Paper and Packaging, Non-U.S.. has bullishly inflected with outstanding breadth. Names we find attractive include: UPMKY, SEOAY, FBR, SPPJY, and HAIPF. Group MA-20, Diversified Mining, continues to exhibit leadership characteristics, and we would buy on any pullbacks. Names that are technically attractive in this Group are : BHP, RIO, BBL, NGLOY, and TCK. Our Groups MA-26 Gold, Western Hemisphere, Large-Cap and MA-27 Gold, Western Hemisphere Small-Cap, are experiencing severe pullbacks. Continue to watch for short-term reversals that may be bullish flags, as they continue to hover around their respective 200-day moving averages

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