Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

A review of market leadership through macro cross-asset and conventional technical analysis viewpoints shows a possible bullish set-up for the reflation trade. However, the jury is still out on this bullish scenario. We need to see the cyclical and value sectors exhibit better and broader relative performance as confirmation of reflationary strength. Investors may gain better clarity on market direction once the jitters over the debt ceiling and Biden’s stimulus program are resolved.

A review of market leadership through macro cross-asset and conventional technical analysis viewpoints shows a possible bullish set-up for the reflation trade. However, the jury is still out on this bullish scenario. We need to see the cyclical and value sectors exhibit better and broader relative performance as confirmation of reflationary strength. Investors may gain better clarity on market direction once the jitters over the debt ceiling and Biden’s stimulus program are resolved.

Q4 Sector Review: Assessing the Yield Surge Fallout

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

US Treasury (10 Yr Generic) / Technical Analysis

Charts Highlighted: XLE, RYE, WTI Crude Oil, XLF, XLB, XLI, RCD, EEM, XLU, XLP, AWK, AEE, WMT, PEP, NUE, STLD, X, CMC, SMSMY, SCHN, RYI, TMST, MT, TX, MTL, ETR, FTS, CMS, CNP, LNT, NI, OGE, BKH, NEE, DUK, SO, and AEPCyclical value areas including Financials, Materials, Manufacturing, Transportation, and equal-weighted Discretionary display short-term improvement as interest rates show signs of a potential bottom at 1.13%. This is encouraging, however we are still neutral yet constructive overall. As we noted last week, we need to see the 10-year Treasury yield breach, and hold above, 1.45%, as well as sustained price improvement by small-caps (i.e., IWM above $234.50) before we can declare a new broad-based bull market.

Charts Highlighted: XLE, RYE, WTI Crude Oil, XLF, XLB, XLI, RCD, EEM, XLU, XLP, AWK, AEE, WMT, PEP, NUE, STLD, X, CMC, SMSMY, SCHN, RYI, TMST, MT, TX, MTL, ETR, FTS, CMS, CNP, LNT, NI, OGE, BKH, NEE, DUK, SO, and AEPCyclical value areas including Financials, Materials, Manufacturing, Transportation, and equal-weighted Discretionary display short-term improvement as interest rates show signs of a potential bottom at 1.13%. This is encouraging, however we are still neutral yet constructive overall. As we noted last week, we need to see the 10-year Treasury yield breach, and hold above, 1.45%, as well as sustained price improvement by small-caps (i.e., IWM above $234.50) before we can declare a new broad-based bull market.

10-Year Treasury Yield Below Key Resistance; Buying Utilities, Consumer Staples, and Steel Stocks

Our review of market internals shows that the value and reflation trade is gaining ground. If this trend continues, it would translate into a bullish intermediate-term outlook for equities. However, investors have to be aware of the supply chain disruption risks from the Delta variant, the chances of a political impasse in Washington, and the negative effects of a possible corporate tax increase.

Our review of market internals shows that the value and reflation trade is gaining ground. If this trend continues, it would translate into a bullish intermediate-term outlook for equities. However, investors have to be aware of the supply chain disruption risks from the Delta variant, the chances of a political impasse in Washington, and the negative effects of a possible corporate tax increase.

Constructive Value and Reflation Green Shoots

Advanced Micro Devices / Technical Analysis

The market continues to send mixed signals and we remain cautious and selective, preferring large-caps over small-caps, growth over value, and defensives (Utilities, Staples, REITs, Health Care) over cyclical value (Energy, Materials, Manufacturing, Transportation, Financials). While market dynamics suggest a 5-15% pullback is in the cards, there continues to be an absence of breakdowns at the index and Sector level; even the weaker Sectors such as Energy and Transportation are not yet breaking down. Until we start to see breakdowns at the Sector and index level, we remain constructive overall.

The market continues to send mixed signals and we remain cautious and selective, preferring large-caps over small-caps, growth over value, and defensives (Utilities, Staples, REITs, Health Care) over cyclical value (Energy, Materials, Manufacturing, Transportation, Financials). While market dynamics suggest a 5-15% pullback is in the cards, there continues to be an absence of breakdowns at the index and Sector level; even the weaker Sectors such as Energy and Transportation are not yet breaking down. Until we start to see breakdowns at the Sector and index level, we remain constructive overall.

U.S. Equity Strategy: Buying Semiconductors, Auto Dealers, and Asset Mgmt/Custody Banks

It’s time for another periodic review of sector leadership. Our latest RRG chart shows growth sectors (technology, communication services) and selected defensive sectors (consumer staples, healthcare, REITs) in the top half of the chart, indicating leadership positions. Value and cyclical sectors are the laggards in the bottom half.We interpret these conditions as neither bullish nor bearish, but a story of balanced leadership. The high beta components of the S&amp;P 500, growth and value, have been undergoing an internal rotation. As the economy shifted from an early-cycle recovery to a mid-cycle expansion (see <a href="https://www.smartkarma.com/insights/how-to-navigate-the-mid-cycle-expansion" target="_blank" rel="noopener">How to Navigate the Mid-Cycle Expansion</a>), market jitters over stalling global growth have risen. As a consequence, investors have rotated from the cyclical and reflation trade back into growth as growth stocks become more valuable when economic growth is scarce. At the same time, the stock market has also been supported by defensive sectors such as healthcare and real estate. Currently, value is showing some signs of early strength, but a turn in the value/growth relationship hasn’t been confirmed.Our base-case scenario calls for a choppy range-bound market until the cyclical and reflation trade theme retakes market leadership. If the stock market were to definitively turn upward, leadership may have to come from high-beta small-cap stocks.

It’s time for another periodic review of sector leadership. Our latest RRG chart shows growth sectors (technology, communication services) and selected defensive sectors (consumer staples, healthcare, REITs) in the top half of the chart, indicating leadership positions. Value and cyclical sectors are the laggards in the bottom half.We interpret these conditions as neither bullish nor bearish, but a story of balanced leadership. The high beta components of the S&amp;P 500, growth and value, have been undergoing an internal rotation. As the economy shifted from an early-cycle recovery to a mid-cycle expansion (see How to Navigate the Mid-Cycle Expansion), market jitters over stalling global growth have risen. As a consequence, investors have rotated from the cyclical and reflation trade back into growth as growth stocks become more valuable when economic growth is scarce. At the same time, the stock market has also been supported by defensive sectors such as healthcare and real estate. Currently, value is showing some signs of early strength, but a turn in the value/growth relationship hasn’t been confirmed.Our base-case scenario calls for a choppy range-bound market until the cyclical and reflation trade theme retakes market leadership. If the stock market were to definitively turn upward, leadership may have to come from high-beta small-cap stocks.

Sector Review: Balanced Leadership and Rotation

United States

Energy Select Sector SPDR Fund is an exchange-traded fund incorporated in the USA.  The ETF tracks the performance of the Energy Select Sector Index.  The ETF holds large-cap U.S. energy stocks. It invests in companies that  develop & produce crude oil & natural gas, provide drilling and other energy related services. The holdings are weighted by market capitalization.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Energy Select Sector SPDR Fund (XLE US)

Q4 Sector Review: Assessing the Yield Surge Fallout

A review of market leadership through macro cross-asset and conventional technical analysis viewpoints shows a possible bullish set-up for the...

Cam Hui

10-Year Treasury Yield Below Key Resistance; Buying Utilities, Consumer Staples, and Steel Stocks

Cyclical value areas are improving, but so are defensives. In order to get more bullish, we need to see the 10-year Treasury yield break above...

Vermilion Research

Constructive Value and Reflation Green Shoots

Our review of market internals shows that the value and reflation trade is gaining ground. If this trend continues, it would translate into a...

Cam Hui

U.S. Equity Strategy: Buying Semiconductors, Auto Dealers, and Asset Mgmt/Custody Banks

Despite our overall cautious outlook, several areas are attractive and buyable, including: Semiconductors, Auto Dealers, and Asset Management...

Vermilion Research

Sector Review: Balanced Leadership and Rotation

Our base-case scenario calls for a choppy range-bound market until the cyclical and reflation trade theme retakes market leadership.

Cam Hui

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)