Vermilion ETF Pathfinder: Actionable ETF research & Ideas
Upgrading Energy and Small-caps• Energy and small-caps breaking out. We are upgrading both to overweight. Continued strength in oil prices has led the XLE to breakout topside resistance... see below and page 6. Also breaking out to new highs is the Russell 2000 small-cap index (IWM)... see below and page 3.
• Big picture trends: Interest rates, the USD, and commodities. The 10-year Treasury yield has continued to climb, moving as high as 3.115% last week to levels not seen since 2011. With that said, the 30-year may be the yield to watch. The USD's advance has coincided with rising commodity prices, an odd combination. We reiterate our bullish outlook on broad commodities (DBC) and oil prices (DBO, USO, BNO)... see pages 2 and 3.
• Market outlook and internals. Two recent bullish developments help support our increasingly positive outlook: (1) the SPY is hitting a higher high relative to mid-April, and (2) the SPY is inflecting topside a descending triangle resistance level. Additionally, market internals and breadth indicators remain mostly positive aside from one concerning indicator... see page 4.
• Sector overweights: Technology (XLK): Software (IGV/XSW) is leadership. Energy (XLE): Exploration and production (XOP/IEO) and oil services (XES/OIH) are outperforming. Financials (XLF): Broker-dealers & securities exchanges (IAI) and regional banks (KRE) remain attractive... see pages 5 and 6.
• Actionable Industry ETFs: IGV, IAI, XOP and IHI... see page 10.
• International: Price trends for developed international markets (EFA) remain attractive, but relative strength remains weak. Be selective. The $45 level continues to hold for EM (EEM), and we remain constructive... see page 11.
• Actionable Int'l ETFs: EWC, SCZ, EWU, EWQ, EWI, ENOR, EWS, MCHI, EWY, THD, ECH, and EPU... see pages 12-14.
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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