Vermilion Compass: Weekly Equity Strategy
• Long-term bullish outlook remains intact. As we discussed in our last Compass, we believe the intraday low of 2,532.69 made by the S&P 500 on 2/9/18 marked an important short-term bottom within the long-term advance. We continue to see this low and the 200-day moving average as critical support levels should there be a retest. After a quick recovery from these lows, the S&P 500 has paused near the 50-day moving average, a logical resting area as the market determines its next move... see below.• Tech Sector shows largest relative strength rankings (RSR) improvement. Our cap-weighted Technology RSR saw the largest jump last week, led by strength in AAPL and CSCO... see page 2. In today's report we highlight attractive and actionable groups within Technology, all relating to software and the attractiveness of dependable recurring revenues: Software; Enterprise Applications, E-Commerce, Education, and Customer Relationship Mgt. (CRM)... see pages 10-21.
• Banks showing strength. With banks breaking out to new price and relative strength highs, we highlight two actionable groups that stand to benefit from both rising interest rates and tax reform... see pages 3 and 6-7.
• Metals and mining stocks are an area to focus on. As proposals surrounding steel and aluminum import tariffs surface - and more importantly, related metals and mining stocks begin responding favorably - we believe this is an area to focus on... see page 4.
• Cyclicals continue to outperform. Cyclicals are leadership, confirmed by a variety of metrics including: (1) the Consumer Discretionary/Staples ratio (XLY/XLP), which is advancing to yet another new high; (2) our RSR rankings led by Consumer Discretionary and Tech, with Utilities rounding out the bottom; and (3) our latest list of Groups trading at 3-month relative strength highs, of which Consumer Discretionary and Tech account for 40% of the results.
• Internals remain healthy. Advance-decline lines bouncing off support and the Consumer Discretionary/Staples ratio moved to a new high... see page 5
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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