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

<p>Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global <strong>Technology, Discretionary, </strong>and <strong>Manufacturing </strong>Sectors remain leadership -- add exposure/remain overweight. The <strong>Financial</strong> Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.</p>

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global Technology, Discretionary, and Manufacturing Sectors remain leadership -- add exposure/remain overweight. The Financial Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.

Global Equity Strategy: Santa Claus Rally Underway

<p>While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: <strong>Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation</strong></p>

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

<p>Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.</p>

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This bullish price action combined with market dynamics which remain mostly healthy lead us to believe the lows of this recent correction are in. Consumer Discretionary and Manufacturing Sectors continue to be two attractive Sectors that are outperforming globally; we highlight numerous actionable names in today's report.

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<p>Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the Japanese market overall offers value investors rich pickings relative to valuations that had been getting more stretched by the day in other regions, especially the US. Below, we provide a quick synopsis of the trading companies’ business models and our thoughts on other potential investments that could attract Berkshire.</p>

Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the Japanese market overall offers value investors rich pickings relative to valuations that had been getting more stretched by the day in other regions, especially the US. Below, we provide a quick synopsis of the trading companies’ business models and our thoughts on other potential investments that could attract Berkshire.

A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/834/original/2020-08-02_06-39-22.png?1596317982" class="editor-image img-responsive" data-smartkarma-image-id="149834"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>CORRECTION</strong> - The last day of July saw the TOPIX index fall by 2.8% to reach a new two-month low, 8.2% below the closing high of June 8th. A combination of a strong yen, peak COVID-19 cases, the continuing unedifying stream of results &amp; revisions, and month-end portfolio 'adjustments' proved toxic. Our Results Score lost a further 57 basis points, while bullish initial full-year forecasts from <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a> and <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso (6902 JP)</a> helped the Forecast/Revision Score recover by 51 basis points. Nevertheless, the market's correlation with earnings and revisions momentum remains distorted by central bank liquidity. As noted in<a href="https://www.smartkarma.com/insights/japan-market-update-tired" target="_blank" data-smartkarma-citation="insights:41562" rel="noopener"> Tired</a>, we expect both our Scores to bottom nearer the 2009 lows, in which case the Bank of Japan's cumulative purchases could reach over 10% of market value.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/839/original/2020-08-02_07-35-10.png?1596321328" class="editor-image img-responsive" data-smartkarma-image-id="149839"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>DOWNFALL</strong> - After one-third of quarterly earnings announcements, at the current pace forward aggregate operating and net income could reach ¥35 trillion and ¥20 trillion, respectively by the end of the month, taking the market multiple to 30x, absent any further correction in share prices. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/840/original/2020-08-02_07-52-16.png?1596322358" class="editor-image img-responsive" data-smartkarma-image-id="149840"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR SCORES</strong> - As in past cycles, the <strong>Information Technology</strong>,<strong> Internet</strong>, and<strong> Healthcare</strong> Sectors have proved to be the most resilient. On the downside, the breadth of the lowest-scoring Sectors is abnormal, with <strong>Consumer Services</strong> and <strong>Transport &amp; Logistics</strong> joining <strong>Metals</strong>, <strong>Autos</strong>, <strong>Eletcial Equipment</strong> and<strong> Machinery</strong>. The trailing-twelve-month (TTM) results in the table below confirm the chart above but suggests some caution over <strong>Internet</strong> Sector margins.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/842/original/2020-08-02_07-59-45.png?1596322803" class="editor-image img-responsive" data-smartkarma-image-id="149842"></figure><div class="content-caption">Source • Japan Analytics</div><hr><p style="text-align: center;"><strong>•BEST &amp; WORST 31st JULY •</strong></p><p style="text-align: left;"><strong>BEST &amp; WORST</strong> - Combining the day's results, revisions and forecasts, we select the 'best' and the 'worst' announcements according to our scoring. On the podium were <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a> and <a href="https://www.smartkarma.com/entities/infocom-corp" target="_blank" data-smartkarma-citation="entities:8412:1" rel="noopener">Infocom (4348 JP)</a>. In the pits were <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a> and three railway lines - <a href="https://www.smartkarma.com/entities/odakyu-electric-railway-co" target="_blank" data-smartkarma-citation="entities:5405:1" rel="noopener">Odakyu (9007 JP)</a>, <a href="https://www.smartkarma.com/entities/west-japan-railway-co" target="_blank" data-smartkarma-citation="entities:12077:1" rel="noopener">West Japan (9021 JP)</a> and <a href="https://www.smartkarma.com/entities/central-japan-railway-co" target="_blank" data-smartkarma-citation="entities:13520:1" rel="noopener">Central Japan (9022 JP)</a> for which we will show the Peer Group's record-low long-term Scores.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/913/original/2020-08-02_08-30-42.png?1596324654" class="editor-image img-responsive" data-smartkarma-image-id="149913"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/914/original/2020-08-02_08-31-29.png?1596324699" class="editor-image img-responsive" data-smartkarma-image-id="149914"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/915/original/2020-08-02_08-33-28.png?1596324818" class="editor-image img-responsive" data-smartkarma-image-id="149915"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/916/original/2020-08-02_08-40-22.png?1596325251" class="editor-image img-responsive" data-smartkarma-image-id="149916"></figure><div class="content-caption">Source • Japan Analytics</div><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
<p style="text-align: left;"><strong>PERCENTAGES</strong> - <strong>66%</strong> of quarterly results,  <strong>71%</strong> of annual forecasts/revisions and <strong>75%</strong> of interim forecasts have negative Scores and <strong>26%</strong> of companies reporting lost money for the quarter.</p>
</div><hr><div><p style="text-align: center;"><strong>429 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 28% Positive / 6% Neutral / 66% Negative</li>
<li>
<strong>Average Results Score Change:</strong> -3.1 points</li>
<li>
<strong>Average % Change in Revenue:</strong> -9.3% Quarter YoY / -2.0% Rolling TTM YoY </li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -1.0 ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 26%</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>153 Annual • 115 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 26% Positive / 3% Neutral / 71% Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change</strong>: 24% Positive / 1% Neutral / 75% Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -8.4 points</li>
</ul></div>

Source • Japan AnalyticsCORRECTION - The last day of July saw the TOPIX index fall by 2.8% to reach a new two-month low, 8.2% below the closing high of June 8th. A combination of a strong yen, peak COVID-19 cases, the continuing unedifying stream of results &amp; revisions, and month-end portfolio 'adjustments' proved toxic. Our Results Score lost a further 57 basis points, while bullish initial full-year forecasts from Takeda Pharmaceutical (4502 JP) and Denso (6902 JP) helped the Forecast/Revision Score recover by 51 basis points. Nevertheless, the market's correlation with earnings and revisions momentum remains distorted by central bank liquidity. As noted in Tired, we expect both our Scores to bottom nearer the 2009 lows, in which case the Bank of Japan's cumulative purchases could reach over 10% of market value.Source • Japan AnalyticsDOWNFALL - After one-third of quarterly earnings announcements, at the current pace forward aggregate operating and net income could reach ¥35 trillion and ¥20 trillion, respectively by the end of the month, taking the market multiple to 30x, absent any further correction in share prices. Source • Japan AnalyticsSECTOR SCORES - As in past cycles, the Information Technology, Internet, and Healthcare Sectors have proved to be the most resilient. On the downside, the breadth of the lowest-scoring Sectors is abnormal, with Consumer Services and Transport &amp; Logistics joining Metals, Autos, Eletcial Equipment and Machinery. The trailing-twelve-month (TTM) results in the table below confirm the chart above but suggests some caution over Internet Sector margins.   Source • Japan Analytics•BEST &amp; WORST 31st JULY •BEST &amp; WORST - Combining the day's results, revisions and forecasts, we select the 'best' and the 'worst' announcements according to our scoring. On the podium were Takeda Pharmaceutical (4502 JP) and Infocom (4348 JP). In the pits were Casio Computer (6952 JP) and three railway lines - Odakyu (9007 JP), West Japan (9021 JP) and Central Japan (9022 JP) for which we will show the Peer Group's record-low long-term Scores.Source • Japan Analytics

DAILY STATS
PERCENTAGES - 66% of quarterly results,  71% of annual forecasts/revisions and 75% of interim forecasts have negative Scores and 26% of companies reporting lost money for the quarter.
429 Quarterly Results

Results Score: 28% Positive / 6% Neutral / 66% Negative

Average Results Score Change: -3.1 points

Average % Change in Revenue: -9.3% Quarter YoY / -2.0% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.0 ppt

Percentage Making Quarterly Losses: 26%
 153 Annual • 115 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 26% Positive / 3% Neutral / 71% Negative

Interim Forecast/Revision Score Change: 24% Positive / 1% Neutral / 75% Negative

Average Forecast/Revision Score Change: -8.4 points


🇯🇵 JAPAN • Results & Revisions 31st July - Takeda, Yamato/SG, Seria, FP, Keyence, Dai-Ichi Sankyo

Japan

DENSO CORPORATION manufactures electronic parts for automobiles.  The Company's products include automobile air conditioners, air bags, ignition systems, generators, power steering systems, and spark plugs with iridium electrode. The Company also produces communication equipment for mobile navigation system.

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Denso Corp (6902 JP)

Global Equity Strategy: Santa Claus Rally Underway

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns across indexes, and we continue to...

Vermilion Research

Cautiously Optimistic on Global Equities

We are constructive on global equities and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75...

Vermilion Research

Global Equity Strategy:

Key $70 support on the MSCI ACWI (ACWI-US) held strong last week, and ACWI-US is now inflecting topside its bullish falling wedge pattern. This...

Vermilion Research

A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons

Last week it was revealed that Warren Buffet had taken stakes of about 5% in Japan’s five major trading companies. This comes at a time when the...

Mio Kato

🇯🇵 JAPAN • Results & Revisions 31st July - Takeda, Yamato/SG, Seria, FP, Keyence, Dai-Ichi Sankyo

CORRECTION - The last day of July saw the TOPIX index fall by 2.8% to reach a new two-month low, 8.2% below the closing high of June 8th. A...

Campbell Gunn

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