Vermilion ETF Pathfinder: Actionable ETF research & Ideas
Upgrading Utilities; Downgrading Industrials• Utilities upgrade, Industrials downgrade. Utilities' price and relative strength trends have been hitting higher lows and higher highs since the market bottomed in February, justifying an upgrade to market weight... see below and page 7. As for Industrials, the XLI's price and relative strength trends have continued to deteriorate, prompting us to downgrade the sector to market weight... see below and page 8.
• Big picture trends: Commodities and the USD. Broad commodities (DBC) are hitting new highs even as the USD (UUP) has continued its recent surge; we reiterate our bullish crude oil (DBO, USO, BNO) stance... see page 2.
• Big picture trends: Interest rates, large vs. small-caps, and growth vs. value. The 10-year Treasury yield is approaching 5-year highs and is testing the critical 3.00% resistance level. The large vs. small-cap ratio is testing support. With the growth vs. value ratio hitting a new high, we reiterate: overweight growth... see page 3.
• Market outlook and internals. As long as support levels continue to hold for the S&P 500, our outlook remains neutral but constructive. Expect more volatility and consolidation. 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. Financials (XLF): Securities exchanges and regional banks (KRE) are attractive... see page 5.
• Actionable Industry ETFs: KCE, BJK, PXQ, and CRAK... see page 10.
• International: We remain constructive on developed international markets (EFA). Be selective. With price support at $45 continuing to hold for EM (EEM) and relative strength favorable, we remain constructive... see page 11.
• Actionable Int'l ETFs: SCZ, EWI, ENOR, EWS, EWU, EWQ, THD, and EPU... 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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