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Vermilion ETF Pathfinder: Actionable ETF research & Ideas

Technicals improving for int'l developed markets

An ongoing concern of ours has been weak foreign markets which could potentially derail the U.S. markets' advance. The situation has improved in terms of price and RS for international developed markets (VEA, EFA) in recent weeks, adding to our already bullish U.S. outlook... see chart below.

• Interest rates on the rise. 10- and 30-year U.S. Treasury yields have been climbing over the last several weeks and are currently just below critical resistance levels (3.1% on the 10-year and 3.25% on the 30-year). We continue to believe higher rates - especially above these resistance levels - have the potential to derail the market's advance, but thus far no such derailment has occurred...see chart below.

• Big picture trends. The large-cap (IVV) vs. small-cap (IJR) ratio is bottoming, and we recommend shifting to overweight large-caps. We also provide updates on growth (IUSG) vs. value (IUSV), cyclicals (XLY) vs. staples (XLP), and commodities... see pages 2-3.

• Sector overweights: Technology (XLK), Consumer Discretionary (XLY), and Health Care (XLV)... see pages 4-5.

• Actionable Industry ETFs: PPH, KIE, ITA, and JETS... see page 9.

• Int'l and EM. As noted above, developed int'l ETFs (VEA, EFA) are improving and are no longer in price and RS downtrends. Add exposure. On the other hand, broad EM (EEM, VWO) price and RS downtrends remain intact - stay underweight as long as this continues... see chart below and page 10.

• Actionable Int'l ETFs. DXJ, EWJ, EWL, and EPOL... see page 11.