Vermilion ETF Pathfinder: Actionable ETF research & Ideas
Downgrading defensive sectors: Staples, Utilities, and Real EstateWe continue to grapple with the possibility that the Christmas Eve low was “the low,†while also considering the potential that the current oversold bounce may be a bear market rally - and that the potential for a retest of the December lows could be around the corner. Short-term market/technical developments and other observations below lead us to believe that a more constructive overall outlook on the broad market is warranted.
• Sector weighting changes: We are downgrading Consumer Staples (XLP), Utilities (XLU), and Real Estate (XLRE) to market weight due to RS deterioration as the market attempts to bottom -- reduce exposure... see pages 4-5. We are also seeing RS stabilization and improvement for cyclical Sectors. We are looking to upgrade Energy (XLE), Industrials (XLI), and Materials (XLB), but would prefer to do so on a pullback given the current short-term extended/overbought nature of the market... see pages 8-9.
• Big picture trends: The USD (UUP) continues to display waning upside momentum. Precious metals (GLD, SLV) are pulling back. Oil prices (DBO) have bounced with equities. High yield spreads have narrowed substantially, reducing liquidity/economic concerns (also HYG, JNK stabilizing). Small-caps (IJR) have improved relative to large-caps (IVV). Growth (VUG) gaining ground relative to value (VTV)... see page 3.
• Actionable Industry ETFs: SOXX, KRE, IAI, and ITA... see page 10.
• EM and Int'l: Remain overweight EM (EEM, VWO) and underweight developed int'l (EFA, VEA). Both EM and developed int'l display short-term price improvements -- bottom potential... see page 11.
• Positively developing int'l ETFs: MCHI, EZA, EPOL, EPHE, ECH, EWM, ICOL, 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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