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Vermilion ETF Pathfinder: Actionable ETF research & Ideas

Downgrading Discretionary and Financials

In recent months we have highlighted rising interest rates as a concern, asserting it has the potential to derail the market's advance. Last week the 10-year and 30-year Treasury yields broke above critical resistance areas - 3.1% and 3.25%, respectively. The sell-off in bonds coincided with a stumble for the U.S. stock market, but no derailment yet considering the S&P 500's multi-month uptrend remains intact. For now we remain constructive with the uptrend intact, and we are monitoring the 50- and 100-day moving averages for support.

• Big picture trends. The equal-weight cyclicals (RCD) vs. staples (RHS) ratio is at support and is vulnerable to a breakdown. We also provide updates and reiterate our views on growth (IUSG) vs. value (IUSV), large-caps (IVV) vs. small-caps (IJR), and commodities... see page 2.

• Sector downgrades. Shorter-term price and RS uptrends for Discretionary (XLY) are being violated. Additionally, though Financials (XLF) are not breaking down from a price perspective, RS recently hit a 23-month low and remains in a downtrend... see pages 5 and 6.

• Sector overweights: Technology (XLK) and Health Care (XLV)... see page 3.

• Actionable Industry ETFs: XHS, FBT, IGV, FDN, ITA, IEO, MLPI, CRAK... see pages 9-10.

• Int'l and EM. Developed int'l ETFs (VEA, EFA) are consolidating in a horizontal range which leads to our neutral absolute outlook. Broad EM (EEM, VWO) has not been as fortunate, as price and RS downtrends remain intact - stay underweight... see page 11.

• Actionable Int'l ETFs. DXJ, EWJ, EIS, and NORW... see page 12.