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

Market dynamics remain largely bullish and we continue to see signs of improving risk appetites. As a result, we are on the verge of shifting to an outright bullish stance. High yield spreads hit new 2021 narrows on Friday as they moved to 14-year lows. Additionally, defensive areas including Staples (XLP), Utilities (XLU), and Gold (GLD) are breaking to new 2021 RS lows.

Market dynamics remain largely bullish and we continue to see signs of improving risk appetites. As a result, we are on the verge of shifting to an outright bullish stance. High yield spreads hit new 2021 narrows on Friday as they moved to 14-year lows. Additionally, defensive areas including Staples (XLP), Utilities (XLU), and Gold (GLD) are breaking to new 2021 RS lows.

U.S. Equity Strategy: Downgrading Consumer Staples To Underweight; Watching 10-Year Yield Closely

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

Cross Asset Strategy

The FOMC's insistence that inflation is "transitory" looks increasingly delusional. Over the latest 3 months (March-May 2021), the core PCE price index has increased at an annualized pace of 6.4% -- and the core CPI has increased at an annualized 7.6% in those 3 months. While the Fed's median inflation forecast for 2021 rose by 1 percentage point between March and June (to 3.4% YoY), and real GDP growth is projected to be far above trend in 2021 and 2022 (which would normally trigger inflation), the FOMC remains sanguine about inflation in 2022, and hence promises to persist with US$120 billion of asset purchases monthly. 
In our view, the persistence of aggressive monetary expansion is the key cause of the spurt in inflation, and will boost inflation further in the months ahead. M2 money supply grew consistently more than 20% YoY in April 2020-March 2021 (more than double the pace in 2009-10), and was still up 14.5% YoY in April 2021 and 12.9% YoY in May 2021 on a very high base. However, despite the FOMC promising to purchase US$120 billion of bonds monthly, the monetary base declined marginally in May 2021 (admittedly after very rapid increases in the previous 3 months), suggesting that the FOMC is turning more pragmatic in its monetary expansion than its official statements suggest. 
Equity valuations are extremely stretched, as exemplified by a CAPE (cyclically-adjusted P/E) ratio of 38x -- levels only reached once in the past 140 years (in the run-up to the "dot com bubble" that peaked in March 2000). As the inflation prints continue to stay elevated, we expect the Fed to be obliged to incrementally withdraw its monetary accommodation -- first by "tapering" (reducing the size of asset purchases, arguably begun in May 2021), and then by raising the Fed Funds rate to 0.25% (up 12.5bp) by the 2-3 November 2021 FOMC meeting. Incremental tightening actions will cause the over-valued equity market to decline 10% over the next 3-6 months. We recommend being underweight equities and risk assets (including emerging markets). Cyclicals, consumer cyclicals and high-yielding defensive stocks will provide refuge from the storm.

The FOMC's insistence that inflation is "transitory" looks increasingly delusional. Over the latest 3 months (March-May 2021), the core PCE price index has increased at an annualized pace of 6.4% -- and the core CPI has increased at an annualized 7.6% in those 3 months. While the Fed's median inflation forecast for 2021 rose by 1 percentage point between March and June (to 3.4% YoY), and real GDP growth is projected to be far above trend in 2021 and 2022 (which would normally trigger inflation), the FOMC remains sanguine about inflation in 2022, and hence promises to persist with US$120 billion of asset purchases monthly. 
In our view, the persistence of aggressive monetary expansion is the key cause of the spurt in inflation, and will boost inflation further in the months ahead. M2 money supply grew consistently more than 20% YoY in April 2020-March 2021 (more than double the pace in 2009-10), and was still up 14.5% YoY in April 2021 and 12.9% YoY in May 2021 on a very high base. However, despite the FOMC promising to purchase US$120 billion of bonds monthly, the monetary base declined marginally in May 2021 (admittedly after very rapid increases in the previous 3 months), suggesting that the FOMC is turning more pragmatic in its monetary expansion than its official statements suggest. 
Equity valuations are extremely stretched, as exemplified by a CAPE (cyclically-adjusted P/E) ratio of 38x -- levels only reached once in the past 140 years (in the run-up to the "dot com bubble" that peaked in March 2000). As the inflation prints continue to stay elevated, we expect the Fed to be obliged to incrementally withdraw its monetary accommodation -- first by "tapering" (reducing the size of asset purchases, arguably begun in May 2021), and then by raising the Fed Funds rate to 0.25% (up 12.5bp) by the 2-3 November 2021 FOMC meeting. Incremental tightening actions will cause the over-valued equity market to decline 10% over the next 3-6 months. We recommend being underweight equities and risk assets (including emerging markets). Cyclicals, consumer cyclicals and high-yielding defensive stocks will provide refuge from the storm.  

3 Months of MoM Inflation Oblige Stealth Tightening; Overvalued Equities to Fall

We continue to see a mixed market environment, but we remain constructive overall considering market dynamics remain largely positive (high yield spreads and relative strength for defensives sending risk-on signals, etc.). We explain our outlook below.

We continue to see a mixed market environment, but we remain constructive overall considering market dynamics remain largely positive (high yield spreads and relative strength for defensives sending risk-on signals, etc.). We explain our outlook below.

U.S. Equity Strategy: S&P 500 Still Bullish, Holding Above Support

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Shanghai Stock Exchange Composite Index / Technical Analysis

The lack of proper correlation between other major markets and those in China still stands out.As others markets look concerning, the Shanghai Composite is starting to look constructive again, at least in the near term.In addition, the FTSE China A50 index is also turning up after holding key levels. Considering it is already 16% off the year’s high, it really is a different picture to many other equity indices around the world.

The lack of proper correlation between other major markets and those in China still stands out.As others markets look concerning, the Shanghai Composite is starting to look constructive again, at least in the near term.In addition, the FTSE China A50 index is also turning up after holding key levels. Considering it is already 16% off the year’s high, it really is a different picture to many other equity indices around the world.

Chicago Board Options Exchange Volatility Index / Technical Analysis

Chicago Board Options Exchange Volatility Index

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see <a href="https://www.smartkarma.com/insights/us-equities-time-to-get-defensive" target="_blank" data-smartkarma-citation="insights:51332" rel="noopener">US Equities: Time to Get Defensive</a>These comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

Regular readers will know that a useful comparison has been made about the rally in the Dow Jones since last years low with the rally seen from March 2009 to May 2010.A similar comparison has been made between the S&amp;P 500 / Bonds Ratio over the same periods - see US Equities: Time to Get DefensiveThese comparisons have so far given good guidance about turning defensive on equities over the past month and bullish on Bonds.In a similar fashion, the chart below compares the trends in the VIX Index with the aftermath of the last crisis 11-12 years ago.The similarities in the levels at work are striking and warn of possible complacency in the market place that could lead to much higher levels of volatility than seems to be generally expected.

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

U.S. Equity Strategy: Downgrading Consumer Staples To Underweight; Watching 10-Year Yield Closely

Market dynamics remain largely bullish and we continue to see signs of improving risk appetites. As a result, we are on the verge of shifting to an...

Vermilion Research

3 Months of MoM Inflation Oblige Stealth Tightening; Overvalued Equities to Fall

Core PCE rose 6.4% annualized in Mar-May 2021; despite FOMC promises to persist with large QE, base money contracted in May 2021, & more tightening...

Prasenjit K. Basu

U.S. Equity Strategy: S&P 500 Still Bullish, Holding Above Support

We continue to see a mixed market environment, but we remain constructive overall considering market dynamics remain largely positive. We explain...

Vermilion Research

China Equities – Time for a Rebound?

China Indices are starting to look constructive again in the near term. Important levels and setups are highlighted here

Shyam Devani

VIX Index: How Concerned Should We Be?

The signs on the VIX Index not only show a historical similarity to the aftermath of the last crisis but also complement the bearish signs seen on...

Shyam Devani