Vermilion Compass: Weekly Equity Strategy
Bottoming energy stocks support risk-on messageThe technical narrative remains bullish, and it's not the S&P 500 and Russell 2000's new highs that are talking the loudest -- it's the Sector and Group trends. With the exception of Consumer Discretionary, cyclicals continue to outperform: Tech's long-term leadership status remains intact; Manufacturing is breaking out to all-time RS highs; Financials are recovering; Materials are on-deck for an upgrade to overweight; Biotechs are breaking out; and Energy, which we have highlighted for the past month, is bottoming. Throw in YTD RS lows in Utilities and Consumer Staples, and if that doesn't spell “risk onâ€, we don't know what does.
• Energy is bottoming. Global energy stocks are reversing their YTD declines, a move supported by the multi-year bottom patterns developing in Brent and WTI. Take advantage of the latest pause in names like CVX, HAL, and OXY... page 3
• Tech won't quit. Tech's tenure as a global leader remains intact. And though many individual names appear extended, our Sector's chart exhibits a relative strength pause above long-term support, suggesting it's not finished outperforming. Overweight... page 4
• Manufacturing is breaking out to all-time relative strength highs. The Sector broke out last month to all-time relative strength highs, confirming its leadership status. Given the size of the base that produced this breakout, we expect Manufacturing to continue outperforming. Overweight... page 5
• Financials continue to recover. Aided by a rebound in interest rates, bank stocks are recovering from failed breakdowns, setting the stage for another leg higher. Asset managers also exhibit strength. In today's report we highlight actionable ideas in both Groups ... pages 9-20
• International equities are outperforming. The charts overseas confirm the U.S.'s new highs: EM continues to lead--a risk-on signal--and the EAFE (developed int'l) is breaking out from a 3-year base.
• Defensive sectors are trading at YTD relative strength lows.
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Ameriprise Financial is a holding company. Through its subsidiaries, the company provides a range of products and services to individual and institutional clients. The company's segments are: Advice and Wealth Management, which provides financial planning and advice, as well as brokerage services, to retail clients through its advisors; Asset Management, which provides investment management, advice and products to clients through the Columbia Threadneedle Investments? brand; Annuities, which provides variable and fixed annuity products to clients; and Protection, which provides products to address the protection and risk management needs of the company's retail clients including life, disability income insurance.
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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