Vermilion ETF Pathfinder: Actionable ETF research & Ideas
The S&P 500 managed to close above the key 2,817 resistance level last week as the recovery from 4Q2018 continues. We would like to see a more decisive upside move and for the index stay above this level for a few more days before calling it an official breakout. Overall we remain positive and continue to believe a “buy the dip†strategy is warranted. Below we highlight several observations which lead us to our positive outlook:• An offensive Sector shift: We are upgrading Materials (RTM, XLB) to market weight as RS continues to stabilize. Additionally, we are downgrading Health Care (RYH) to market weight and Staples (XLP) to underweight as these defensive areas of the market are exhibiting RS deterioration. Overall these shifts are consistent with our view that the market has bottomed... see pages 4-9 for all Sector comments.
• Big picture trends: Semiconductors (SOXX, SMH, XSD) are breaking out. Small-caps (IWM, IJR) have lagged relative to large-caps in recent weeks, correcting an overbought situation. Remain overweight growth (VUG) over value (VTV). Treasury yields appear poised for additional downward pressure. We also update our views on the USD (UUP) and commodities (DBC, DBO, CPER, PALL, GLD)... see pages 2-3.
• Actionable Industry ETFs: IGV, SOXX, XBI, and IHI... see page 10.
• EM and Int'l: The EM (EEM, VWO) bottoming process continues, but RS is consolidating. Developed int'l ETFs (EFA, VEA) are on the cusp of breaking topside 13-14 month downtrends as European markets continue to improve... see page 11.
• Actionable int'l ETFs: MCHI, EPU, TUR, GREK, ARGT, EWI, EWL, and FEU... see pages 12-13.
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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