EUR 217.56 For Business Accounts Only

Vermilion ETF Pathfinder: Actionable ETF research & Ideas

Testing Support

Long-Term Bullish, But Testing Support at the 200-Day Moving Average. While our long-term bullish outlook remains, many of the short-term concerns we've highlighted have come to the forefront - and in a hurry.

We noted in our January 19th ETF Pathfinder that the Dow Jones Industrials index was quantitatively extended, as seen by the Dow's distance above its 200-day moving aver-age reaching the highest level dating back to 1999. Thus, we advised against adding new exposure to stocks and indexes that were comparatively extended, and suggested taking advantage of dips. In the last two weeks, the S&P 500 and MSCI ACWI have returned to their respective 200-day moving averages, offering an opportunity to buy the dip.

We also noted to watch 2.62% on the 10-year Treasury yield (the high from late 2016), and perhaps even more importantly, the response from equity markets to a sustained close above this level. The rapid increase in rates above this level has clearly been prob¬lematic for equity markets so far. If the back up in rates continues, especially a sustained move above 3.00% on the 10-Year, we think equity markets may be in for more indigestion.

Sector Overweights: Financials (XLF): Investment brokers are a pocket of strength within the XLF... see page 4. Technology (XLK): Semiconductors are a theme to stick with, as they continue to outperform both the S&P 500 and the tech sector... see page 4. Materials (XLB): Aluminum and steel stocks are outperforming... see page 5. Industrials (XLI): Aerospace & defense names are breaking out to new relative strength highs... see page 5.

Downgrade: Energy (XLE): With the XLE threatening to break down below uptrending support and relative strength moving sideways, we are downgrading energy to market weight... see page 6

Actionable Industry ETFs: FDN, GRID, ITA, SLX... see page 9

Actionable Int'l ETFs: EWQ, EWN, EIRL, EWO, ECH, MCHI, EWY... see pages 11-12