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Vermilion ETF Pathfinder: Actionable ETF research & Ideas

Sell In May And Go Away?

The weight of the evidence remains positive and we continue to recommend adding exposure on pullbacks. We are entering a seasonally weaker period for the S&P 500 ("sell in May and go away") which could lead to some softness, however that alone is no reason to be bearish and we continue to see pullbacks as buying opportunities.

S&P 500. The S&P 500 remains bullish and is in an uptrend, though continues to be extended in the short-term as it hovers near potential resistance at the megaphone pattern. This leaves markets vulnerable heading into the seasonally weaker months. Still, these alone are not reasons to be bearish and we believe pullbacks should be treated as buying opportunities. We are constructive as long as the S&P 500 is above major 4000-4030 support.
Positives Outweigh Negatives. Small-caps (IWM) display short-term bullish price and RS inflections, cyclicals continue to outperform relative to defensives (RCD/RHS), commodities (DJP, DBO, CPER) remain bullish, high yield spreads are near 14-year lows, and the US dollar is consolidating. All these developments are historically consistent with bull markets... see chart below and page 2.
Actionable Industry ETFs: LIT, KIE, XBI, and IYT... see page 9.
EM and Int'l Markets. EM (EEM) remains above major $52 base support and RS shows signs of stabilizing -- accumulate. Developed int'l (EFA) also remains bullish from a price perspective... see page 10.