Vermilion ETF Pathfinder: Actionable ETF research & Ideas
Positive outlook intactOverall we remain positive on U.S. and foreign equities. Below we highlight several observations which lead us to this conclusion:
• Broadening yield curve inversions = recession? The more pronounced yield curve inversion (3M/10Y and 1Y/10Y) is unsettling and is a concern of ours. At the same time we believe it does not automatically equate to a recession in the near-term, and lower yields may actually serve to stimulate the economy. Additionally, high yield spreads are not suggestive of worsening economic conditions... see chart below and page 2.
• Small vs. large-cap ratio finding support. Recent small-cap (IWM, IJR) underperformance may be coming to an end, a positive for risk sentiment... see page 2.
• Inverse head-and-shoulder bottoming patterns forming. We highlight several key areas of the market which appear to be bottoming... see page 3.
• U.S. dollar; Commodities: The USD (UUP) is consolidating and oil (DBO) and copper (CPER) prices continue to develop positively... see page 4.
• Actionable Industry ETFs: SOXX, IHI, XBI, and XHB... see page 11. Leadership or improving price action in these key risk-on areas are supportive of our positive outlook.
• EM and Int'l ETFs are constructive from a price perspective: EM (EEM, VWO) and developed int'l (EFA, VEA) ETFs continue to show signs of bottoming... see page 12.
• Actionable int'l ETFs: MCHI, EPU, GREK, ICOL, EWI, EWL, EWH, and ENZL... see pages 13-14.
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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