Vermilion ETF Pathfinder

Transcription

1 Vermilion Technical Research Week of November 25, 13 ETF themes and actionable commentary. Vermilion ETF Pathfinder ETFs highlighted: BKF, DXJ, EWG, EWI, EWP, EZU, FCG, GXC, HAO, IAI, IEO, IEV, IWM, KIE, KRE, MDY, PSCE, SLX, SPY, VWO, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XPH. 11/25/13 Small Caps: Despite short-term weakness, small caps remain long-term leaders relative to large caps (IWM/SPY). More recently, small caps are emerging as leadership relative to mid caps (IWM/MDY), having resolved a multi-year dispute. See page 3. Financials: The Financial sector remains cyclical leadership. Internally, regional banks (KRE) continue to outperform. The regional bank / large bank ratio (KRE/KBE) continue to round higher. The Broker-Dealer ETF, IAI, is another leader, benefitting from large weightings in the electronic market/exchange stocks (ICE, CME, NDAQ, CBOE). See page 4. Europe: European funds continue to exhibit relative improvements. For broad exposure purposes, we favor the EMU-focused fund, EZU. The fund boasts a % weighting in France, Germany, and Spain - three leading countries, albeit of varying durations. EZU also has no exposure to the lagging U.K. market. PIGS-related ETFs, such as the Spain (EWP) and Italy (EWI) ishares, are exhibiting pullback opportunities above base support. See pages 5-6. Emerging Markets: Emerging markets are exhibiting tepid improvements but still lack leadership qualities. From a relative perspective, we favor BRIC-related funds, such as the BKF, over broad EM funds (EEM, VWO). Many Chinese-focused ETFs are breaking out of cyclical price bases. See page 7. Japan: Accumulate. Japan s equity market is beginning to break free from a 6-month consolidation. This follows a decisive breakout above the secular downtrend dating back to 89. Wisdomtree Trust WisdomTree Japan Hedged Equity Fund % 11:11:58 AM VWAP:49.98 DXJ-USA Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - Price Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - MA-0D Cvol: 2,722,2 Avg: 2,657,733 Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - Price Relative to ishares MSCI ACWI ETF David P. Nicoski, CMT dave@vermilioncap.com Shelley D. Moen, CMT shelley@vermilioncap.com Joe W. Jasper, CFA joe@vermilioncap.com John M. Betz, CMT john@vermilioncap.com France Avenue S. Edina, MN

2 Table of Contents Top-Down ETF Themes Sector SPDR Analysis ETF Charts of Interest Energy Financials Health Care Materials Europe Japan China Vermilion ETF Pathfinder 2

3 ETF Themes: Small caps remain long-term leadership despite short-term weakness. Small vs Large: Small caps remain long-term leadership relative to large caps. However, this outperformance dating back to early- 99 has taken a short-term step back in recent weeks as seen below. While we do not believe it marks a decisive shift away from small caps, our estimate is that rotation is benefitting large cap names with exposure to improving overseas markets. Small vs Mid: Through last summer, small and mid caps have bandied about, struggling to establish a clear winner for the past year and a half. As the Russell 00/S&P 0 Mid Cap ratio shows below, small caps are beginning to settle in as established leadership. The ratio s breakout above resistance in July was the deciding vote. ishares Russell 00 ETF - Price Relative to SPDR S&P 0 ETF '08 '09 ' '11 '12 '13 ishares Russell 00 ETF - Price Relative to SPDR S&P MidCap 0 ETF Trust Series 1 ETF Trust Units '08 '09 ' '11 '12 '13 Vermilion ETF Pathfinder 3

4 ETF Themes: Financials remain an overweight. Regional banks and financial exchange stocks & ETFs are leadership. The financial sector s steady advance continues to receive a fair share of scoffs, even from other technicians. While the mid-summer bout of relative underperformance raised red flags, long-term uptrends were never reversed. Accordingly, we are maintaining our overweight recommendation (our longest-standing sector overweight, in fact). In particular, regional banks remain a space of leadership. The KBW Regional Banking Index ETF, KRE (see below), continues to advance within the confines of a cyclical price advance. From a relative perspective, KRE continues to outperform the broad market (KRE/SPY), the financial sector (KRE/XLF), and even larger banks, as seen in the KRE/KBE ratio below. Financial Exchange stocks are another space of internal leadership. Names like CME, CBOE, ICE, and NDAQ are breaking out from bullish bases. While no pure-play exists for this group from an ETF perspective, the ishares DJ US Broker-Dealers ETF, IAI, is heavily weighted towards these stocks, including: ICE (9.6%), CME (6.6%), NDAQ (4.8%), and CBOE (4.6%). SPDR S&P Regional Banking ETF % 1:44:12 PM VWAP:38.86 KRE-USA SPDR S&P Regional Banking ETF - Price SPDR S&P Regional Banking ETF - MA-0D Cvol: 1,524,052 Avg: 2,287,414 SPDR S&P Regional Banking ETF - Price Relative to SPDR S&P Bank ETF Vermilion ETF Pathfinder 4

5 ETF Themes: Europe continues to exhibit relative leadership characteristics Overweight...still: Our three global overweight recommendations are: U.S., Japan, and Europe. The latter, while fragmented at the country-specific level during the first half of the year, is beginning broaden from a breadth perspective. Germany (EWG), a secular leader, has performed steadily. Ireland (EIRL) and Switzerland (EWL) have acted as cyclical leaders. France is beginning to play a part. And, since July, the PIGS have climbed out of the muck, emerging from cyclical bottoming patterns in September. PIGS: While not nearly as unexploited any longer, the PIGS markets still present attractive technical opportunities. The Spain (EWP) and Italy (EWI) ishares are the two focal points. Both ETFs are currently retracing back towards the necklines of 2-year, head-and-shoulders bottoms. Previously resistance and now support, these levels represent ideal entry points (see charts on the next page). Accumulate. EZU: For broad exposure to Europe, we favor the ishares EMU Index ETF, EZU. Exposure is limited exclusively to EMU countries (European Monetary Union), leaving out the U.K., Switzerland, Denmark, and Sweden. It is this lack of exposure to the lagging U.K. market, in particular, that is the selling point in addition to the heavy weightings in Germany, France, and Spain. And this exposure to these relative leaders has led to decisive outperformance relative to other broad-based European funds such as the ishares Europe 3 ETF, IEV. As seen in the plotted ratio of the EZU vs. IEV below, the chart depicts a bullish head-and-shoulders breakout in favor of the U.K.-free EZU. See the weightings breakdown below for a comparison of EZU versus IEV (ishares Europe 3 ETF). IEV: United Kingdom (33%), France (14%), Switzerland (14%). EZU: France (31%), Germany (%), Spain (11%). All three are relative-leadership markets. ishares MSCI EMU ETF % :45:29 AM VWAP:39. EZU-USA ishares MSCI EMU ETF - Price ishares MSCI EMU ETF - MA-0D Cvol: 841,782 Avg: 772,122 ishares MSCI EMU ETF - Price Relative to ishares Europe ETF 115 Vermilion ETF Pathfinder 5

6 ETF Themes: Europe continues to exhibit relative leadership characteristics ishares MSCI Spain Capped ETF % VWAP: EWP-USA ishares MSCI Spain Capped ETF - Price ishares MSCI Spain Capped ETF - MA-0D Cvol: Avg: 3,7 ishares MSCI Spain Capped ETF - Price Relative to ishares MSCI ACWI ETF ishares MSCI Italy Capped ETF % VWAP: EWI-USA ishares MSCI Italy Capped ETF - Price ishares MSCI Italy Capped ETF - MA-0D Cvol: Avg: 456,681 ishares MSCI Italy Capped ETF - Price Relative to ishares MSCI ACWI ETF 1 Vermilion ETF Pathfinder 6

7 ETF Themes: Emerging Markets, while far from leadership, are exhibiting tepid improvements. ishares MSCI BRIC ETF - Price Relative to Vanguard FTSE Emerging Markets ETF '07 '08 '09 ' '11 '12 '13 Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF % 1:08:01 PM VWAP:26.71 HAO-USA Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - Price Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - MA-0D Cvol:,013 Avg: 163,228 Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - Price Relative to Vanguard FTSE Emerging Markets ETF '07 '08 '09 ' '11 '12 '13 Vermilion ETF Pathfinder 7

8 Sector SPDR ETF Overview Vermilion ETF Pathfinder 8

9 Sector SPDR ETF Overview XLF: Financial Sector SPDR Financial Select Sector SPDR Fund % 9:29:54 AM VWAP:21.18 XLF-USA Financial Select Sector SPDR Fund - Price Financial Select Sector SPDR Fund - MA-0D 22 JPM 8.2 WFC BRK.B 8.1 BAC C 6.0 AXP AIG 2.8 USB 2.8 GS MET 2.3 Cvol: 4,723,324 Avg: 55,062,5 Financial Select Sector SPDR Fund - Price Relative to S&P XLY: Consumer Discretionary SPDR Consumer Discretionary Select Sector SPDR Fund % 9::46 AM VWAP:64.31 XLY-USA Consumer Discretionary Select Sector SPDR Fund - Price Consumer Discretionary Select Sector SPDR Fund - MA-0D AMZN CMCSA 6.2 HD 5.8 DIS MCD 4.9 F 3.3 FOXA 3.3 TWX SBUX 3.0 NKE 2.9 Cvol: 639,1 Avg: 5,9,375 Consumer Discretionary Select Sector SPDR Fund - Price Relative to S&P Vermilion ETF Pathfinder 9

10 Sector SPDR ETF Overview XLK: Technology Sector SPDR Technology Select Sector SPDR Fund % 9:31:19 AM VWAP:34.15 XLK-USA Technology Select Sector SPDR Fund - Price Technology Select Sector SPDR Fund - MA-0D AAPL 14.6 GOOG MSFT 8.6 IBM 5.9 T 5.9 VZ ORCL 3.9 QCOM CSCO 3.6 INTC Cvol: 656,5 Avg: 8,189,021 Technology Select Sector SPDR Fund - Price Relative to S&P XLI: Industrials Sector SPDR Industrial Select Sector SPDR Fund % 9:31:46 AM VWAP:49.78 XLI-USA Industrial Select Sector SPDR Fund - Price Industrial Select Sector SPDR Fund - MA-0D 55 GE 11.4 BA 5.5 UTX 5.3 MMM UNP 4.5 UPS 4.1 HON 4.1 CAT 3.2 EMR 2.8 DHR 2.8 Cvol: 1,681,1 Avg: 11,784,863 Industrial Select Sector SPDR Fund - Price Relative to S&P Vermilion ETF Pathfinder

11 Sector SPDR ETF Overview XLE: Energy Sector SPDR Energy Select Sector SPDR Fund % 9::26 AM VWAP:87.49 XLE-USA Energy Select Sector SPDR Fund - Price Energy Select Sector SPDR Fund - MA-0D XOM 16.3 CVX 13.8 SLB 7.2 OXY 3.9 COP PXD 3.3 EOG 3.2 HAL 3.1 APC 3.1 NOV Cvol: 3,991,234 Avg: 11,617,929 Energy Select Sector SPDR Fund - Price Relative to S&P 0 XLB: Materials Sector SPDR Materials Select Sector SPDR Fund % 9:32:05 AM VWAP:44.45 XLB-USA Materials Select Sector SPDR Fund - Price Materials Select Sector SPDR Fund - MA-0D MON.6 DD.2 42 DOW 8.6 FCX 6.8 PX LYB 6.3 ECL PPG 4.8 APD IP Cvol: 659,815 Avg: 7,5,7 Materials Select Sector SPDR Fund - Price Relative to S&P 0 Vermilion ETF Pathfinder 11

12 Sector SPDR ETF Overview XLV: Health Care Sector SPDR Health Care Select Sector SPDR Fund % 9:32: AM VWAP:54.27 XLV-USA Health Care Select Sector SPDR Fund - Price Health Care Select Sector SPDR Fund - MA-0D 55 JNJ 12.8 PFE.0 MRK 6.7 GILD AMGN 4.2 BMY 4.1 ABBV 3.7 UNH 3.5 CELG 3.0 BIIB 2.9 Cvol: 7,025 Avg: 6,151,377 Health Care Select Sector SPDR Fund - Price Relative to S&P XLP: Consumer Staples Sector SPDR Consumer Staples Select Sector SPDR Fund % 9:32:37 AM VWAP:43. XLP-USA Consumer Staples Select Sector SPDR Fund - Price Consumer Staples Select Sector SPDR Fund - MA-0D PG 14.2 KO PM 9.1 WMT CVS 5.1 PEP MO CL 3.7 MDLZ COST 3.5 Cvol: 911,518 Avg: 6,984,018 Consumer Staples Select Sector SPDR Fund - Price Relative to S&P Vermilion ETF Pathfinder 12

13 Sector SPDR ETF Overview XLU: Utilities Sector SPDR Utilities Select Sector SPDR Fund % 9:33:11 AM VWAP:39.08 XLU-USA Utilities Select Sector SPDR Fund - Price Utilities Select Sector SPDR Fund - MA-0D DUK D 8.0 NEE 7.6 SO EXC AEP SRE 4.2 PPL 4.0 PCG PEG Cvol: 1,676,691 Avg: 8,1,164 Utilities Select Sector SPDR Fund - Price Relative to S&P Vermilion ETF Pathfinder 13

14 ETF Charts of Interest Vermilion ETF Pathfinder 14

15 ETF Charts of Interest IEO: ishares US Oil & Gas Exploration & Production ETF Group: EF-02 Energy ishares US Oil & Gas Exploration & Production ETF % 9:38:42 AM VWAP:82.00 IEO-USA ishares US Oil & Gas Exploration & Production ETF - Price ishares US Oil & Gas Exploration & Production ETF - MA-0D COP 13.9 EOG 7.2 APC 7.2 PSX 6.5 APA 5.9 NBL 4.1 MRO 4.1 PXD 4.0 MPC 3.9 DVN 3.8 Cvol: 19,488 Avg: 256,112 ishares US Oil & Gas Exploration & Production ETF - Price Relative to Energy Select Sector SPDR Fund FCG: First Trust ISE-Revere Natural Gas Index Fund Group: EF-02 Energy First Trust ISE-Revere Natural Gas Index Fund % 9:39:24 AM VWAP:19.47 FCG-USA First Trust ISE-Revere Natural Gas Index Fund - Price First Trust ISE-Revere Natural Gas Index Fund - MA-0D PVA 6.2 KWK MHR 4.5 QEP 4.3 NFX 4.2 BBG NBL 4.1 TLM 4.1 DVN 4.0 APA 4.0 Cvol: 69,4 Avg: 367,168 First Trust ISE-Revere Natural Gas Index Fund - Price Relative to Energy Select Sector SPDR Fund Vermilion ETF Pathfinder 15

16 ETF Charts of Interest PSCE: PowerShares S&P SmallCap Energy Portfolio Group: EF-02 Energy PowerShares S&P SmallCap Energy Portfolio % 9:07:16 AM VWAP:46.54 PSCE-USA PowerShares S&P SmallCap Energy Portfolio - Price PowerShares S&P SmallCap Energy Portfolio - MA-0D BRS.8 PDCE 7.4 CKH 6.5 CRZO 6.1 HOS 5.9 EXH 5.6 SGY GEOS 4.8 CJES 4.1 NR Cvol: Avg: 28,4 PowerShares S&P SmallCap Energy Portfolio - Price Relative to Energy Select Sector SPDR Fund '09 ' '11 '12 '13 KIE: SPDR S&P Regional Banking ETF Group: EF-03 Financials SPDR S&P Regional Banking ETF % 9:44:04 AM VWAP:38.27 KRE-USA SPDR S&P Regional Banking ETF - Price SPDR S&P Regional Banking ETF - MA-0D PVTB 1.8 PACW 1.7 CSE 1.7 SIVB 1.7 GBCI 1.7 SBNY BXS 1.7 TCBI EWBC IBKC Cvol: 312,8 Avg: 2,284,587 SPDR S&P Regional Banking ETF - Price Relative to S&P Vermilion ETF Pathfinder 16

17 ETF Charts of Interest IAI: ishares U.S. Broker Dealers ETF Group: EF-03 Financials ishares U.S. Broker-Dealers ETF % 9:43:38 AM VWAP:36.43 IAI-USA ishares U.S. Broker-Dealers ETF - Price ishares U.S. Broker-Dealers ETF - MA-0D ICE 9.3 GS 7.5 MS 7.2 SCHW 6.7 CME 6.6 AMP 6.5 NDAQ 4.8 AMTD 4.7 RJF 4.6 CBOE 4.5 Cvol: 5,784 Avg: 442,342 ishares U.S. Broker-Dealers ETF - Price Relative to S&P 0 XPH: SPDR S&P Pharmaceuticals ETF Group: EF-04 Health Care SPDR S&P Pharmaceuticals ETF % 9:48:04 AM VWAP:86.19 XPH-USA SPDR S&P Pharmaceuticals ETF - Price SPDR S&P Pharmaceuticals ETF - MA-0D ENDP 4.8 SNTS 4.8 SLXP 4.3 VPHM 4.2 JAZZ 4.1 PRGO 4.0 BMY 3.9 ACT 3.9 FRX 3.8 MNK 3.8 Cvol: 55,888 Avg:,515 SPDR S&P Pharmaceuticals ETF - Price Relative to S&P Vermilion ETF Pathfinder 17

18 ETF Charts of Interest SLX: Market Vectors Steel Index Fund Group: EF-07 Materials Market Vectors Steel Index Fund % 9:49:16 AM VWAP:49.27 SLX-USA Market Vectors Steel Index Fund - Price Market Vectors Steel Index Fund - MA-0D RIO 12.7 VALE 11.8 MT 6.5 PKX 6.2 TS 6.2 SID 5.6 NUE 5.1 TX 4.9 STLD 4.8 GGB 4.5 Cvol: 7,2 Avg: 193,6 Market Vectors Steel Index Fund - Price Relative to S&P EZU: ishares MSCI EMU ETF ishares MSCI EMU ETF % :13:02 AM VWAP:39. EZU-USA ishares MSCI EMU ETF - Price ishares MSCI EMU ETF - MA-0D Group: EF-17 Europe FP 3.3 SAN 3.3 BAYN 2.7 SIE 2.7 SAN 2.5 BAS 2.5 ABI 2.2 ALV 2.1 DAI 2.0 SAP 1.9 Cvol: 1,779,5 Avg: 766,291 ishares MSCI EMU ETF - Price Relative to ishares MSCI ACWI ETF Vermilion ETF Pathfinder 18

19 ETF Charts of Interest EWG: ishares MSCI Germany ETF Group: EF-17 Europe ishares MSCI Germany ETF % :11:51 AM VWAP:29.79 EWG-USA ishares MSCI Germany ETF - Price ishares MSCI Germany ETF - MA-0D BAYN 8.9 SIE 8.7 BAS 8.2 ALV 6.7 DAI 6.6 SAP 6.4 DBK 4.0 DTE 3.6 VOW3 3.2 MUV2 3.2 Cvol: 1,168,484 Avg: 2,262,5 ishares MSCI Germany ETF - Price Relative to ishares MSCI ACWI ETF DXJ: WisdomTree Japan Hedged Equity Fund Group: EF-18 Japan Wisdomtree Trust WisdomTree Japan Hedged Equity Fund % :16:16 AM VWAP:49.36 DXJ-USA Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - Price Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - MA-0D Cvol: 1,043,921 Avg: 2,612,154 Wisdomtree Trust WisdomTree Japan Hedged Equity Fund - Price Relative to ishares MSCI ACWI ETF Vermilion ETF Pathfinder 19

20 ETF Charts of Interest GXC: SPDR S&P China ETF Group: EF-22 China SPDR S&P China ETF % ::13 AM VWAP:78.79 GXC-USA SPDR S&P China ETF - Price SPDR S&P China ETF - MA-0D 1 1 B0LMTQ 6.9 B1G1QD 5.8 B01CT BIDU 4.6 B B00G0S Cvol: 38,481 Avg: 123,0 SPDR S&P China ETF - Price Relative to ishares MSCI ACWI ETF HAO: Guggenheim China Small Cap ETF Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF % :17:21 AM VWAP:26.71 HAO-USA Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - Price Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - MA-0D Group: EF-22 China YOKU WX Cvol: 0,2 Avg: 163,263 Claymore Exchange-Traded Fund Trust 2 Guggenheim China Small Cap ETF - Price Relative to ishares MSCI ACWI ETF Vermilion ETF Pathfinder

21 This page intentionally left blank. David P. Nicoski, CMT Shelley D. Moen, CMT Joe W. Jasper, CFA John M. Betz, CMT France Avenue S. Edina, MN Disclaimer: The information contained herein is privileged, confidential and protected from disclosure. Any unauthorized disclosure distribution, dissemination or copying of this material or any attachment is strictly prohibited; such information, whether derived from Vermilion Technical Research, LLC or from any oral or written communication by way of opinion, advice, or otherwise with a principal of the company is not warranted in any manner whatsoever, is for the use of our customers only and may be obtained from internal and external research sources considered to be reliable. It is not necessarily complete and its accuracy is not guaranteed by Vermilion Technical Research, LLC, its operating entity or the principals therein. Neither the information nor any opinion expressed constitutes a solicitation for the purchase of any future or security referred to in Vermilion research publications. Principals of Vermilion Technical Research, LLC may or may not hold, or be short of, securities discussed herein, or of any other securities, at any time. The foregoing also expressly applies to any trial subscription.