Vermilion Compass: Weekly Equity Strategy
• Long-term bullish outlook remains intact. After pausing at the 50-day moving average for six trading days, the S&P 500 has broken out of its six-day trading range to the upside, and is poised to test the late-January highs... see below.• Consumer Staples Sector shows largest relative strength ranking (RSR) decline. The cap- and equal-weighted Consumer Staples RSR saw the largest decline last week, further deteriorating after a disappointing earnings report from WMT. Seen as a barometer for retail, WMT's weakness spread to companies, both large and small, throughout the Sector... see page 2.
• Large-caps, growth, Tech outperforming. We reiterate three recommendations: overweight large-caps, growth, and Technology. While we like to see our recommendations working, more participation from small-cap and value segments would be a welcome sign in terms of overall breath. Seeing no signs of leadership changes as a result of recent volatility, we suggest sticking with these long-term trends... see page 3.
• The weight of the evidence affirms our bullish outlook. In a healthy bull market advance, we like to see cyclicals continue to lead, confirmed by a variety of metrics including: (1) both the cap- and equal-weighted Consumer Discretionary/Staples ratios in new high territory; (2) our RSR rankings led by Consumer Discretionary and Tech, with Consumer Staples and 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 49% of the results.
• Constructive market internals. Advance-decline lines show no divergences and the equal-weighted Consumer Discretionary/Staples ratio remains in new high territory... see page 4.
• In today's report we highlight attractive and actionable groups within Technology and Consumer Discretionary. Within Tech we focus on TE-67, our SaaS Software Group, and within Consumer Discretionary we highlight CD-59, our Internet Retailers Group... see pages 9-24.
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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