Vermilion ETF Pathfinder: Actionable ETF research & Ideas
Primary trend remains bullish; buy energy.Highlighted themes and actionable charts:
• Big picture: bullish. Global equity charts still tell a bullish narrative, and we do not see signs of this primary trend changing soon, not with: (1) major indices trending higher; (2) cyclical sectors, led by Tech (XLK), outperforming; (3) defensive sectors like staples (XLP) and utilities (XLU) dropping off toward 12+ month relative strength lows; (4) stabilization in lagging segments like retailers (XRT); (5) bottoming patterns in energy (XLE); and (6) multi-year base patterns visible throughout most international markets, including Europe (HEDJ) and Japan (DXJ). Stay long, stay the course.
• Style: Tactical overweight in small caps. The small/large-cap ratio is bullishly inflecting in favor of small caps, extending the this ratio's 11-year tradition of tactical whipsaws... see page 2
• Style: Growth still leads, but value reveals opportunities. While long-term trends still favor growth, value is beginning to strengthen, aided by a recovery in energy and financials... see page 2
• Sectors & Industries: Overweight cyclicals, buy energy (XLE). Cyclical sectors continue to outperform defense--staples (XLP) and utilities (XLU)--confirming a risk-on environment. Tech (XLK) is the primary driver behind this trend, though it's too extended to comfortably recommend adding new exposure. Better, “less exploited†set-ups are visible in energy (XLE). Here, with the bullish backdrop of Brent and WTI breaking out from multi-year bottoms (see below), energy ETFs are inflecting higher -- buy... see pages 3-4
• International: Overweight int'l, underweight U.S. The U.S./International ratio (SPY/ACWX) continues to roll over in favor of foreign markets. Emerging markets are driving this trend, but Japan and Europe, too, are beginning to outperform. Actionable ETFs: currency-hedged Europe (HEDJ), currency-hedged Germany (HEWG), and India (INDA)... see page 5-6
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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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