Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Financial Select Sector SPDR F / Technical Analysis

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

We continue to see a steady flow of risk-on signals that have us moving toward an outright bullish outlook for the broad US equity market. Below we discuss several bullish developments that leads us to believe we are close to exiting the "mixed market environment" that we have referenced since late March.Charts highlighted: XLF, KBE, Copper, US Dollar, IWD, XLY, Bitcoin, S&amp;P 500, APO, LPLA, ARCC, JHG, KKR, ALLY, CACC, OMF, CIT, WD, GATX, LC, CODI, WRLD, ATLC, BCPC, TROX, ASPN, ASIX, LXU, HWKN, MOS, CF, ICL, SQM, UAN, IPI

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Executive Summary: A liquidity driven melt-up combined with month-end rebalancing to drive bank credit spread performance over the last week. Remove the month-end rebalancing and short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm payroll numbers. The short end of the rates market continued to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up was the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last few weeks. In fact, rate curve flattening, and falling forward breakeven rates, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory.While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning. Although not consensus, this thought is disconcerting, as it suggests the rising rates consensus is very wrong.Therefore, the risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive. Moving too early to position for higher or longer than anticipated inflation may be career ending. Extending duration to take advantage of declining rates is considered insane. Carry trades remain unloved. Ergo, the silent self-doubtful suffering of the rate and credit markets. Security selection based on fundamental analysis, in so much as one avoids unexpected spread widening, may be the differentiator for outsized total returns over the next few weeks.  We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender rather than the bouncer.

Executive Summary: A liquidity driven melt-up combined with month-end rebalancing to drive bank credit spread performance over the last week. Remove the month-end rebalancing and short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm payroll numbers. The short end of the rates market continued to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up was the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last few weeks. In fact, rate curve flattening, and falling forward breakeven rates, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory.While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning. Although not consensus, this thought is disconcerting, as it suggests the rising rates consensus is very wrong.Therefore, the risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive. Moving too early to position for higher or longer than anticipated inflation may be career ending. Extending duration to take advantage of declining rates is considered insane. Carry trades remain unloved. Ergo, the silent self-doubtful suffering of the rate and credit markets. Security selection based on fundamental analysis, in so much as one avoids unexpected spread widening, may be the differentiator for outsized total returns over the next few weeks.  We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender rather than the bouncer.

Bank Credit Weekly: Month-End Rebalancing Takes Risk-Off Before Take-Off

Executive Summary: A liquidity driven melt-up remains the key driver of bank credit spread performance. As US banks push deposits into money market funds, to manage their Supplemental Leverage Ratio requirements, the short end of the rates market continues to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up is the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last week. In fact, rate curve flattening, and forward breakeven rate declines, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory. While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning.The risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive and moving too early to position for higher or longer than anticipated inflation may be career ending. Ergo, the silent self-doubtful suffering of the rate and credit markets.We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender.

Executive Summary: A liquidity driven melt-up remains the key driver of bank credit spread performance. As US banks push deposits into money market funds, to manage their Supplemental Leverage Ratio requirements, the short end of the rates market continues to push investors up the curve to generate returns. Awash with still rising liquidity, this melt-up is the key driver of credit spread outperformance.Risk asset volatility and talking about, talking about, talking about tapering had little lasting impact on US interest rates over the last week. In fact, rate curve flattening, and forward breakeven rate declines, suggest that the interest rate market may buy the Fed’s assessment of inflation as being transitory. While the transitory mantra is believed, whispers of supply driven growth constraints are being mentioned. This would be interest rate and credit spread positive as it would extend the duration of the recovery and thereby delay late-stage economic cycle repositioning.The risk is clearly that the rates market is underpricing the potential for an extended period of higher than anticipated inflation. However, holding cash is expensive and moving too early to position for higher or longer than anticipated inflation may be career ending. Ergo, the silent self-doubtful suffering of the rate and credit markets.We elaborate on these themes within.Market Outlook: The question is whether the over-heating narrative will make a comeback and bring rate and tapering expectations closer. Financial stability risks appear binary from here. Either the Fed is over-accommodative, and it sits on its hands too long while asset bubbles over-inflate so that it gets nasty when it moves, or the Fed gets impatient, and it lowers accommodation unexpectedly which creates a risk off reaction. In both cases, curves flatten in a risk-off environment. We suspect the former is more likely, and for now, the Fed remains the bartender.

Bank Credit Weekly: Liquidity Driven Melt-Up Pulls Spreads Tighter

Public Relations and Social Media Manager, Dechert LLP

Peggy Heffner

Public Relations and Social Media Manager

Dechert is a global specialist law firm

Dechert LLP

Dechert is a global specialist law firm.
Focused on sectors with the greatest complexities, legal intricacies and highest regulatory demands, we excel in delivering practical commercial judgment and deep legal expertise for high-stakes matters.

Our work is widely recognized. We have 20 standout practices noted by Chambers Global, including global-wide rankings for arbitration, corporate investigations, anti-corruption, investment funds and life sciences. Named Antitrust Team of the Year, Chambers USA commends our “accomplished group” as “routinely sought after to handle some of the most significant litigation and transactions in the antitrust world.” 

In an increasingly challenging environment, clients look to us to serve them in ways that are faster, sharper and leaner without compromising excellence. We developed a first-of-its kind legal project management department, which uses technology, people and processes to drive efficiency and deliver value for our clients.

We are innovators. Dechert ranked #7 in the Financial Times’ Top North American Innovative Law Firms. Financial Times also recognizes us among the Top European Innovative Law Firms and highly commends World Compass, our marketing compliance service, which offers investment firms advice in more than 100 jurisdictions.

Thematic (Sector/Industry)

<ul><li>The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last six years.</li><li>It remains to be seen what plans the incoming administration will bring to this area.</li><li>However, new regulatory proposals and other developments continue to present a complicated regulatory climate for banks and other large financial institutions.</li></ul>

The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last six years.It remains to be seen what plans the incoming administration will bring to this area.However, new regulatory proposals and other developments continue to present a complicated regulatory climate for banks and other large financial institutions.

The New Future of US Banking and Financial Services Regulation

Campaign promises rarely turn into specific actions, but when they do, they are necessarily impacted by the dynamics of the legislative process. History suggests, however, that the policies of candidates can be a predictor of likely regulatory trends.

Campaign promises rarely turn into specific actions, but when they do, they are necessarily impacted by the dynamics of the legislative process. History suggests, however, that the policies of candidates can be a predictor of likely regulatory trends.

Implications of the 2016 Election for Banks and Systemically Important Financial Institutions

United States

CIT Group Inc. operates as a holding company. The Company, through its subsidiaries, provides lending, advisory, commercial banking, vendor finance, and leasing services to small and middle market businesses. CIT Group operates globally.

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Cit Group Inc (CIT US)

Upgrading Financials To Overweight; Downgrading Communications To Market Weight

We are upgrading Financials to overweight; Financial Sector ETFs (XLF, RYF), banks (KBE, KRE), and insurance stocks (KIE) are all breaking out to...

Vermilion Research

Bank Credit Weekly: Month-End Rebalancing Takes Risk-Off Before Take-Off

Short duration positioning may remain the best strategy over the next few weeks, absent a material inflection point in the upcoming non-farm...

Hank Calenti, CFA

Bank Credit Weekly: Liquidity Driven Melt-Up Pulls Spreads Tighter

Liquidity remains the key driver of bank credit spread performance. The risk is that the rates market is underpricing the potential for an extended...

Hank Calenti, CFA

The New Future of US Banking and Financial Services Regulation

The presidential election has opened the possibility of significant changes to the Dodd-Frank Act regime that has been implemented over the last...

Dechert LLP

Implications of the 2016 Election for Banks and Systemically Important Financial Institutions

Campaign promises rarely turn into specific actions, but when they do, they are necessarily impacted by the dynamics of the legislative process....

Dechert LLP

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