Vermilion ETF Pathfinder: Actionable ETF research & Ideas
BIG PICTURE... see page 2• Bullish Big Picture. It pays to be farsighted in markets like this. Over the past several months, as U.S. equities have corrugated sideways, accompanied by policy doubts, it has been easy to lose focus of the bullish big picture: long-term trends remain intact; cyclicals still boast attractive relative strength trends--even more so with consumer discretionary beginning to participate; and foreign markets are strengthening, confirming the U.S.'s advance. These trends are easily lost in the daily charts. Focus on weekly charts, and stick with the bullish, long-term trends.
• Small & Mid > Large Caps. The small/large-cap ratio has pulled back to trendline support.
• Growth > value. The growth/value relationship is reversing last year's trend in favor of growth.
U.S. SECTORS... see pages 3-7
• Overweights: Cyclical sectors, led by Tech (XLK), continue to outperform: XLB, XLF, XLI, XLK, and XLY.
• Timely buys: From a relative strength perspective, buy XLY, XLF, and XLI. XLY's RS trend (see inset) is bullishly inflecting, while the latter two depict relative pullbacks to support. All three are highlighted in today's report.
• Energy: Our bullish outlook for energy has yet to unfold. Stocks (and the XLE) have not found their footing, with most trading below their 200-day MAs. While we still view this as part of a larger bottoming process, with crude still trading above support, better relative opportunities exist elsewhere.
U.S. INDUSTRIES... see pages 8-12
• Homebuilders (ITB): Buy. Homebuilders are leadership within the improving consumer discretionary sector.
• Regional Banks (KRE): Buy. Pullback opportunity.
• Aero/Defense (ITA): Buy. The long-term leader depicts a short-term pullback opportunity.
• Others: Metals & mining (XME) and social media (SOCL).
INTERNATIONAL EQUITIES... see pages 13-15
• EM & Europe: If you are looking for bearish charts, do not looking overseas. International markets continue to strengthen, where base patterns are the norm. We favor Europe and emerging markets. Highlighted countries: China (MCHI) and Spain (EWP).
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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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