Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.02 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Bulls Lose The Upper Hand, Consolidation Likely

Steep uptrends have been violated this week on several of the broad global indexes (notably the MSCI ACWI, ACWI ex-US, and EM indexes). As a result we are making a tactical shift to a neutral outlook as we believe consolidation is likely near-term as the market goes through a corrective phase -- potentially something similar to what the market experienced between June and early-July.

· Index Overviews. As noted above, short-term uptrends have been violated for the MSCI ACWI, ACWI ex-US, and EM indexes, prompting our shift from bullish to neutral. These indexes are attempting to make a short-term low near current levels; if short-term support fails to hold they are likely prone to another 5% downside until intermediate-term support levels come into play. Short-term support levels include $78.50-$79 on ACWI-US, $45.70 on ACWX-US, and $43.40 on EEM-US. At the same time, Europe's EURO STOXX 50 and Japan's TOPIX continue to consolidate while Hong Kong's Hang Seng is testing key support; as long as these indexes hold above support we are neutral from a price perspective... see chart below and pages 2-3.

· US Dollar (DXY). The DXY is currently testing downtrend resistance; the important levels to watch include resistance at 94 and support at 92. As long as the DXY is below 94 we believe the pullback for equities is likely to stay contained, while a break above 94 could mean a visit to 95-96 and would likely come alongside a ~5% pullback for ACWI-US.

· Actionable Theme: Major Autos & Auto Parts/Aftermarket. Last week we highlighted several attractive stocks within autos & auto parts (Consumer Discretionary & Manufacturing), a space that has been outperforming within Europe. Today we are expanding on those recommendations with the Europe STOXX 600 Autos & Parts Sector showing major bullish price and RS inflections -- add exposure... see page 4 and pages 6-9.

· Actionable Theme: Materials. The global Materials Sector has continued to outperform amid this recent pullback, and there is no shortage of attractive and actionable stocks across the majority of industries -- remain overweight/add exposure... see page 5 and pages 10-18.
Underlyings
Aluar Aluminio Argentina S.A.I.C.

Aluar Aluminio Argentino is engaged in the exploration, production, sale, and export of primary aluminum, fabricated aluminum and alumina. Through its subsidiary INFA S.A. Co. is engaged in engineering, construction and electro-mechanical services for the plant located in Puerto Madryn.

Arlington Asset Investment Corp. Class A

Arlington Asset Investment is an investment firm that focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a U.S. government agency or government sponsored enterprise (GSE), such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, or by a U.S. government agency, such as the Government National Mortgage Association. Private-label MBS include residential MBS that are not guaranteed by a GSE or the U.S. government.

Aurubis AG

Norddeutsche Steingut is a Germany-based manufacturer and distributor of tiles, concentrating on wall and floor tiles for the residential and commercial sector. As of December 31, 2011, Co. was operational through its two wholly owned subsidiaries Nord Ceram Fliesenproduktions und -vertriebs GmbH & Co. KG, which mass produces standard- and large-size floor tiles under the Pro brand for its own sale and for partners of the parent company; as well as Bremer Wandplatten GmbH, which produces floor and wall tiles under the BW brand. Co.concentrates on business activities in Germany

BYD Company Limited Class H

Compagnie de Saint-Gobain SA

Compagnie de Saint-Gobain manufactures, produces, and distributes industrial materials. Co.'s activities are divided into four sectors: Innovative Materials (Co. makes, processes and sells glass and glazing products for the building, the automotive and solar energy industries; Co. also manufactures Ceramics and Plastics, Abrasives, and Textiles), Construction Products (Co. offers products for the Insulation, Gypsum, Exterior Products, Pipe and Industrial Mortars), Building Distribution (Co. distributes building materials (plumbing, heating and sanitaryware products) and ceramic tiles), and Packaging - Verallia (Co. manufactures glass containers and jars for foodstuffs and beverages).

Companhia Siderurgica Nacional

Companhia Siderurgica is engaged in the entire steel production chain, from the mining of iron ore to the production and sale of a diversified range of steel products. Co. divides its business into five segments: steel, which produces a broad line of steel products, including slabs, hot and cold-rolled, galvanized and tin mill products for various industries; mining, where Co. owns a number of iron ore mines; cement, where Co. produces cement by using slag; logistics in which Co. has equity interests in three railroad companies and operates the Container Terminal at the Itaguai Port; and Co.'s assets in the energy segment which generate electric power.

Fortescue Metals Group Ltd

Fortescue Metals Group is an iron ore producer. As of June 30 2016, Co.'s operations had four mine sites in the Pilbara. The Chichester Hub, which includes the Cloudbreak and Christmas Creek mines, is located in the Chichester Ranges and the Solomon Hub, in the Hamersley Ranges, includes the Firetail and Kings Valley mines. Co. owns and operates an integrated supply chain including its Herb Elliott Port in Port Hedland and a heavy haul railway with over 620km of track. As of June 30 2016, Co.'s total hematite ore proved and probable reserves were 2.17 billion tonnes. Also, as of June 30 2016, Co.'s total magnetite ore proved and probable reserves were 705.0 million tonnes.

Geberit AG

Geberit is a supplier of sanitary technology products. Co. develops, produces and distributes sanitary products and systems for the residential and commercial new construction and renovation markets. Co.'s product range consists of: the Sanitary Systems product area with the Installation Systems, Cisterns & Mechanisms, Faucets & Flushing Systems and Waste Fittings & Traps product lines; and the Piping Systems product area with the Building Drainage Systems and Supply Systems product lines. Co.'s products are sold through the wholesale channel to in more than 120 countries.

HighCape Capital Acquisition Corp.

KAZ Minerals PLC

Kaz Minerals is a holding company. Co. and its subsidiaries operates in the natural resources industry through five divisions: Bozshakol, Aktogay and East Region, which are engaged in the mining and processing of copper and other metals in Kazakhstan; Bozymchak, which is engaged in the mining and processing of copper and gold in Kyrgyzstan; as well as Mining Projects, which is engaged in the development of metal deposits and processing facilities in Kazakhstan. Co. operates the Bozshakol and Aktogay open pit copper mines in Pavlodar and the East Region of Kazakhstan, three underground mines in the East Region of Kazakhstan and the Bozymchak copper-gold mine in Kyrgyzstan.

Kingspan Group Plc

Kingspan is a holding company, engaged in the provision of low energy building solutions. Co.'s operating segments include: Insulated Panels, which is engaged in the manufacture of insulated panels, structural framing and metal facades; Insulation Boards, which is engaged in the manufacture of rigid insulation boards, building services insulation and engineered timber systems; Environmental, which is engaged in the manufacture of environmental, pollution control and renewable energy solutions; and Access Floors, which is engaged in the manufacture of raised access floors.

Lundin Mining Corporation

Lundin Mining is a holding company. Through its subsidiaries, Co. is engaged in the exploration for minerals and the production of base metals, with a focus on zinc.

Mitsubishi Gas Chemical Company Inc.

Mitsubishi Gas Chemical is engaged in the manufacture and sale of organic and inorganic chemicals and advanced materials. Natural Gas Chemicals segment offers methanol, formalin, methanol synthesis catalyst, ammonia, amine and dimethyl ether. Aromatic Chemicals segment offers metaxylene, metaxylenediamini, aromatic aldehydes and plasticizers. Specialty Chemicals segment offers inorganic chemicals, organic titanates, water treatment agents, monomers and adamantane derivatives, as well as engineering plastics including polycarbonate lupilon, polyacetal lupital and high-performance polyamide. Information & Advance Materials segment offers electronic materials and oxygen absorbers.

Northam Platinum Limited

Northam Platinum is platinum group metal (PGM) producer with two primary operating assets, the Zondereinde and Booysendal platinum group metal (PGM) mines in the South African Bushveld Complex. Co. has its own metallurgical operations, including a base metals removal plant and smelter, on the Zondereinde lease area. The Zondereinde mine is a mature operation and produces approximately 280 000oz of PGM in concentrate annually, and the shallower mechanised Booysendal UG2 North mine produces approximately 160 000oz annually. Co. provides its main PGM products, which include platinum, palladium and rhodium to industries, such as motor manufacturing, jewelry and other industrial sectors.

Novolipetsk Steel

Novolipetsk Steel is a vertically integrated steel manufacturing and production group based in Russia. Co. specializes in the manufacturing of high-quality hot and cold rolled steel in a variety of grades and sizes. Co. is also engaged in production and sales of flat steel products including slabs, hot rolled and cold rolled sheet, electrical steel, galvanized steel, cold rolled sheet with polymeric coatings. In addition, Co.'s areas of manufacturing include sintering, coke production, blast furnace production, steel-making, hot and cold-rolled flat steel production, galvanized and prepainted steel production. Co. exports its products to 70 countries around the world.

Sibanye Stillwater Ltd.

Southern Copper Corporation

Southern Copper is a copper producer. The company's mining, smelting and refining facilities are located in Peru and Mexico and the company conducts exploration activities in those countries and in Argentina, Chile and Ecuador. The company's Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper concentrates and molybdenum concentrates, the smelting of copper concentrates to produce blister and anode copper, and the refining of anode copper to produce copper cathodes. The company's Mexican operations are conducted through its subsidiary, Minera Mexico, S.A. de C.V., which engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead.

Taiyo Holdings Co. Ltd.

Taiyo Holdings is a holding company which is the Group's overall business policy formulation and business management functions. Co.'s Group is mainly involved in the manufacture and sale of chemical products for use in the electronics industries. The main product categories Co. cover are printed wiring board (PWB) materials and flat panel display (FPD) materials. PWB materials are mainly solder resist for PWBs, and FPD materials are chemical materials used mainly in touch panels. Co., through its subsidiaries, is also engaged in the provision of technical services related to PWB, as well as the provision of delivery and warehousing services, and natural energy power generation business.

Wacker Chemie AG

Wacker Chemie is active in chemical products. Co. operates in five divisions: Wacker Silicones, which provides products ranging from silicone fluids and emulsions, resins, elastomers and sealants, to silanes and pyrogenic silica grades; Wacker Polymers, which manufactures binders and polymeric additives (such as dispersible polymer powders and dispersions); Wacker Biosolutions, which supplies customized biotech and catalog products for the fine-chemical sector; Wacker Polysilicon, which produces hyperpure polysilicon for the semiconductor, electronics and above all, solar sectors; and Siltronic, which supplies semiconductor manufacturers with silicon wafers.

Yamato Kogyo Co. Ltd.

Yamato Kogyo is a holding company mainly engaged in the manufacture and sale of steel products, railroads and related products materials and heavy-duty processed products. Co. 's principal products include rolled steels such as wide flange shapes (H beams), I-beams and sheet piles; steel bars; trackwork products such as turnouts, compromise rails, expansion joints, crossings, insulated rails, derailment prevention guard, tie plates, rail joints, screw spikes and bolts; steel structures such as stern frames, rudders, structural components for ships and plate-fabricated parts for industrial machinery. Co. also provides transportation, medical waste disposal and real estate services.

Provider
Vermilion Research
Vermilion Research

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.

Analysts
Dave Nicoski

Ross LaDuke

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