Report
Dave Nicoski
EUR 212.70 For Business Accounts Only

Int'l Macro Vision: Sector Synopsis

INT'L STRATEGY: Bullish Big Picture

Global technicals remain on a bullish footing. There's a lot to like overseas, chart-wise, particularly the catering-sized amount of base patterns. These patterns, which act as foundations for rallies, are visible throughout developed and emerging markets, pointing to another leg higher and endorsing our positive outlook.

More importantly, these bases are of a cyclical nature, not short-term set-ups. Exhibit A: Japan.

The TOPIX just cleared the 1,700 level, marking a breakout from a 26-month base to 10-year highs. However, we would argue—and have in our International Compass reports—that a stealth breakout occurred earlier this summer when the Index advanced above 1,600 and the small-cap TOPIX broke out from an 11-year base. Regardless, this breakout argues for the start of a new advance in Japanese equities.

In Europe, where the STOXX 600 is rebounding off its 200-day MA, the most prominent base pattern is visible in Germany's DAX Index. Here, too, this breakout argues for another advance in German (and European) equities.

Lastly, in emerging markets the base patterns get larger. This year's breakouts include: South Korea (6-year base), Taiwan (10-year base), Brazil (9-year base), Thailand (4-year base), India (2-year base), South Africa (2-yeaer base), and the Philippines (2-year base).

Again, the abundance and duration of these patterns support a bullish outlook.

In the remainder of our October Strategy (See attached), we highlight the following actionable themes

• Overweight EM. The emerging/developed ratio is breaking out from a multi-year bottom, supporting an EM overweight. Additionally, commodity sectors, as highlighted below, are strengthening, which we would expect during a period of EM outperformance.

• Energy is bottoming. Both Brent and WTI are emerging from multi-year bottom patterns. Once-reluctant energy stocks are beginning to play catch-up to the strength in crude, setting up an attractive opportunity.

• Overweight materials / add to metals & miners. As industrial metals continue to strengthen, and related stocks bullishly inflect, we are reiterating our metals & mining recommendation.

For a trial to Vermilion Technical Research call (952) 922-7500, or visit our website at: www.vermilioncap.com
Underlying
Chevron Corporation

Chevron is engaged in energy and chemicals operations. Upstream operations consist primarily of, among others, exploring for, developing and producing crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of, among others, refining crude oil into petroleum products; marketing of crude oil and refined products; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives.

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

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