Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTURE• Our bullish outlook is being affirmed by: equity indices advancing to new highs; foreign markets establishing bottoms (Japan, Europe, EM); cyclical sectors outperforming defensive segments; etc. Based on these technical affirmations, we remain optimistic heading into 2017.
• Value still has growth on the ropes. A surge in financials (“valueâ€) coupled with break outs from bottom patterns in energy (“valueâ€) and weakness in biotechs (“growthâ€) is extending value's leadership status.
U.S. SECTORS... see pages 3-4
• Cyclicals > Defense. Overweight: Energy, Financials, Industrials, Materials, and Tech.
• Underweights: Consumer Staples, Health Care, Utilities.
• Increase exposure to Consumer Discretionary. The equal-weighted ETF, RCD, is breaking out, and its relative strength trend depicts signs of a bottoming process. Upgrade candidate (to overweight from MW).
U.S. INDUSTRIES... see pages 5-12
• Retail is strengthening. The SPDR Retail ETF (XRT) just broke out from a 12-month base. Buy.
• Energy is bottoming. To reiterate one of our favorite themes, energy equities are breaking out from 12-15 month bottom patterns, shrugging off the dollar's recent strength. Buy.
• Other attractive themes: social media (SOCL), E&Ps (XOP), natural gas equities (FCG), junior gold miners (GDXJ), agriculture (PAGG), lithium (LIT), and yield-weighted REITs (KBWY). Buy.
INTERNATIONAL EQUITIES... see pages 13-18
• Foreign markets are bottoming. Held back by weak foreign currencies, the MSCI ACWI ex-US (ACWX) is inflecting higher and nearing a breakout from a cyclical bottom. Many individual countries have already passed by resistance, including Japan (DXJ, EWJ). Even the European PIGS boast technical bottoms.
• Buy commodity countries: Brazil (EWZ), Canada (EWC), and Russia (ERUS). Buy.
• European banks are bottoming. Take advantage of this theme with EUFN. Buy.
BONDS, COMMODITIES, & CURRENCIES... see page 19
• Led by base metals (DBB), commodities (DBC) are bottoming.
• Gold and silver continue to work through long-term bottoming patterns. Of the two, we prefer silver. The SLV/GLD ratio is bullishly inflecting following a test of its 200-day MA. Buy.
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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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