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

<ul>
<li>We are downgrading our long-term outlook to neutral (had been bullish since early-November 2023) due to rapidly deteriorating market dynamics</li>
<li>We still believe the S&amp;P 500 is going through a 1- to 4-month consolidation phase, but odds have increased that this consolidation phase could be a topping pattern.</li>
<li>SPX is initially holding at 5100-5191 as discussed last week, but we're not interested in knife-catching or picking a bottom, want to see stabilization/price discovery before adjusting our still-defensive posture.</li>
</ul>


We are downgrading our long-term outlook to neutral (had been bullish since early-November 2023) due to rapidly deteriorating market dynamics
We still believe the S&amp;P 500 is going through a 1- to 4-month consolidation phase, but odds have increased that this consolidation phase could be a topping pattern.
SPX is initially holding at 5100-5191 as discussed last week, but we're not interested in knife-catching or picking a bottom, want to see stabilization/price discovery before adjusting our still-defensive posture.


Downgrading Outlook on $SPX; Upgrading Real Estate and Staples. Many Significant Risk-Off Signals

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September. </li>
<li>Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.

Fast Retailing (9983 JP)'s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September. 
Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.


Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed

<ul>
<li>Breadth continues to improve and Russell 2000 (IWM) small-caps and the Dow remain bullish, all while the S&amp;P 500 and Nasdaq 100 (QQQ) are going through a pullback/consolidation phase.</li>
<li>Considering the Russell 2000 vs. S&amp;P 500 ratio is reversing a 3.5-year downtrend, we expect this trend of small-cap outperformance to continue for months or longer.</li>
<li>With new risk-off signals emerging, potential pullback zones we would look for include 5100-5191 on the S&amp;P 500 and $443-$449 on the QQQ, expecting a low near the election.</li>
</ul>


Breadth continues to improve and Russell 2000 (IWM) small-caps and the Dow remain bullish, all while the S&amp;P 500 and Nasdaq 100 (QQQ) are going through a pullback/consolidation phase.
Considering the Russell 2000 vs. S&amp;P 500 ratio is reversing a 3.5-year downtrend, we expect this trend of small-cap outperformance to continue for months or longer.
With new risk-off signals emerging, potential pullback zones we would look for include 5100-5191 on the S&amp;P 500 and $443-$449 on the QQQ, expecting a low near the election.


Upgrading Health Care to Market Weight; Risk-Off Signals Suggest SPX and QQQ Pullback to Continue

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>Real GDP accelerated to 2.8%QoQsaar growth in Q2CY24 (from 1.4% in Q1), with sharp QoQ acceleration in PCE, investment and government spending, and restocking after three quarters of destocking. </li>
<li>In YoY terms, real GDP grew 3.1%YoY in Q2CY24 led by 5.8%YoY growth in gross investment. Core PCE inflation edged up to 2.63% YoY in Jun'24 (from May's 2.62%YoY). </li>
<li>The annualized rise in core PCE in H1CY24 was 3.33%, with only one month (May'24) of less than 2%MoM (annualized) increase -- insufficient to allow a rate cut before Sep'24. </li>
</ul>


Real GDP accelerated to 2.8%QoQsaar growth in Q2CY24 (from 1.4% in Q1), with sharp QoQ acceleration in PCE, investment and government spending, and restocking after three quarters of destocking. 
In YoY terms, real GDP grew 3.1%YoY in Q2CY24 led by 5.8%YoY growth in gross investment. Core PCE inflation edged up to 2.63% YoY in Jun'24 (from May's 2.62%YoY). 
The annualized rise in core PCE in H1CY24 was 3.33%, with only one month (May'24) of less than 2%MoM (annualized) increase -- insufficient to allow a rate cut before Sep'24. 


US: Strong Growth, Core PCE Inflation at 2.6%YoY Preclude an Immediate Rate Cut

<ul>
<li>After a 0.99%MoM annualised rise in May'24, core PCE inflation eased to 2.57%YoY -- lower than the 2.6%YoY end-CY24 projection that the FOMC believed was compatible with 3 rate cuts. </li>
<li>While the FOMC initially signalled QT in Jun'22, base money increased each month during Jul'23-Feb'24, contributing to higher inflation. Contracting base money since Mar'24 was key to moderating MoM inflation.</li>
<li>Core PCE will likely rise 2%QoQ (annualised) in Q2CY24, and 2.5%YoY in Jun'24. The release of those numbers six days before FOMC decision (31/7/24) will likely trigger Jul'24 rate cut. </li>
</ul>


After a 0.99%MoM annualised rise in May'24, core PCE inflation eased to 2.57%YoY -- lower than the 2.6%YoY end-CY24 projection that the FOMC believed was compatible with 3 rate cuts. 
While the FOMC initially signalled QT in Jun'22, base money increased each month during Jul'23-Feb'24, contributing to higher inflation. Contracting base money since Mar'24 was key to moderating MoM inflation.
Core PCE will likely rise 2%QoQ (annualised) in Q2CY24, and 2.5%YoY in Jun'24. The release of those numbers six days before FOMC decision (31/7/24) will likely trigger Jul'24 rate cut. 


US: Receding Inflation Has Put 3 Rate Cuts Back in Play for 2024

United States

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Dow Jones Industrial Average (INDU INDEX)

Dow Jones Industrial Average (INDU INDEX)

Downgrading Outlook on $SPX; Upgrading Real Estate and Staples. Many Significant Risk-Off Signals

Downgrading our long-term $SPX outlook to neutral (bullish since early-November 2023) due to deteriorating market dynamics; Upgrading Real Estate...

Vermilion Research

Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed

Review period ended yesterday. Fast Retailing's capping will result in a 0.9% drop in index weight. There could be 3 index changes with sector...

Brian Freitas

Upgrading Health Care to Market Weight; Risk-Off Signals Suggest SPX and QQQ Pullback to Continue

Upgrading Health Care $XLV to Market Weight; New Risk-Off Signals Suggest Pullback in $SPX and $QQQ to Continue, looking for pullbacks to 5100-5191...

Vermilion Research

US: Strong Growth, Core PCE Inflation at 2.6%YoY Preclude an Immediate Rate Cut

Core PCE increased 3.33% annualized in H1CY24, and was up 2.63%YoY in Jun'24. With real GDP growing 2.8%QoQsaar and 3.1%YoY in Q2CY24, the FOMC is...

Prasenjit K. Basu

US: Receding Inflation Has Put 3 Rate Cuts Back in Play for 2024

Core PCE rose 0.99%MoM annualised in May'24, as genuine QT occurred in Apr-May'24. The 25th July release of 2%QoQ and 2.5%YoY rises in core PCE...

Prasenjit K. Basu