EUR 47.40 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Corrective Phase Continues As US Dollar Rises; Japan Showing Strength

In our most recent Int'l Compass (9/11/20) we highlighted our belief that global equities (MSCI ACWI) were going through a corrective phase -- this remains true today. Additionally, we view the break above 94 in the US dollar (DXY) as a concerning development for global equities, and if $77 fails to hold on ACWI-US, the next stop is likely to be $75 and the 200-day MA.

· US Dollar (DXY); Broad Global Indexes. Short-term support levels are being violated on broad global indexes ($78.50-$79 on ACWI-US, $45.70 on ACWX-US, and $43.40 on EEM-US) as the DXY breaks above 94 resistance. Support violations and the dollar's breakout tells us there could be more downside coming for global equities, likely to the tune of ~5% (for now). We believe 95-96 is the next likely stop for the US dollar; a move above 96 would raise major concerns for global equities... see charts below and page 2.

· Hong Kong & Europe Lagging, Japan Showing Strength. Hong Kong's Hang Seng has violated support, a sign that there is likely to be additional weakness ahead. Europe's EURO STOXX 50 is clinging to 3150-3170 support, however it may be the next to go. Conversely, large- and small-caps within Japan (TOPIX & TOPIX Small, respectively) are making bullish price and RS inflections -- add exposure. Japanese equities have significant representation in today's report... see page 3.

· Actionable Theme: Health Care. Of all the defensive Sectors, we see Health Care as the most compelling at current levels. Health Care indexes display bullish RS reversals throughout Europe/UK, Japan, and China -- add exposure... see page 4 and pages 6-10.

· Actionable Theme: Technology. Growth continues to outperform relative to value, both in the US and ex-US. Technology is a major part of that -- remain overweight and add exposure on this pullback... see page 5 and pages 10-16.