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 remain bullish global equities if the major $93 support level on MSCI ACWI (ACWI-US) continues to hold (1+ year base support and the 10.5-month uptrend)</li>
<li>The 10-year Treasury yield remains below 4.35% resistance (a positive), but the DXY is climbing above $103.70-$104.70 resistance, and $105.70 is the last line of defense (9-month resistance).</li>
<li>Japan and India remain top overweights, with many of today's buy recommendations from these countries (Real Estate, Energy, Tech/Services, Discretionary). Also downgrading Taiwan and Greece to market weight.</li>
</ul>


We remain bullish global equities if the major $93 support level on MSCI ACWI (ACWI-US) continues to hold (1+ year base support and the 10.5-month uptrend)
The 10-year Treasury yield remains below 4.35% resistance (a positive), but the DXY is climbing above $103.70-$104.70 resistance, and $105.70 is the last line of defense (9-month resistance).
Japan and India remain top overweights, with many of today's buy recommendations from these countries (Real Estate, Energy, Tech/Services, Discretionary). Also downgrading Taiwan and Greece to market weight.


Remain Overweight Japan and India; Key Supports Holding; Buys in Energy, Tech/Services (India)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around <a href="https://www.smartkarma.com/entities/shinsei-bank-ltd" target="_blank" data-smartkarma-citation="entities:16897:1" rel="noopener">Shinsei Bank (8303 JP)</a>. </li>
<li>Shinsei Bank is in "limbo" post control-acquisition by <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">SBI Holdings (8473 JP)</a> and an attempt to go over 50% should be in the works. When is not known.</li>
<li>The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.</li>
</ul>


This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP). 
Shinsei Bank is in "limbo" post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.


The October TOPIX FFW Review and Shinsei Bank (8303)'s Future Float

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.</li>
<li>There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. </li>
<li>Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers' float) has gone up significantly through this process. </li>
</ul>


The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.
There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. 
Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers' float) has gone up significantly through this process. 


Last Leg of TOPIX and JPNK400 FFW Rebal - ¥780bn One-Way Flow Wednesday

<ul>
<li>The TSE Free Float Weight Rebalance to be executed at the close Monday (30 May) is about ¥729bn a side, so it will add ~¥1.5trln to volumes. </li>
<li>A sector-neutral basket of the 98 top upweights and 98 top downweights across the 33 TOPIX sectors saw the upweights UNDER-perform the downweights by about 0.3% since the April rebalance.</li>
<li>Monday again sees very large buy and sell flows at the close. This is a guide to taking advantage of those flows. Sector tables and a spreadsheet is attached.</li>
</ul>


The TSE Free Float Weight Rebalance to be executed at the close Monday (30 May) is about ¥729bn a side, so it will add ~¥1.5trln to volumes. 
A sector-neutral basket of the 98 top upweights and 98 top downweights across the 33 TOPIX sectors saw the upweights UNDER-perform the downweights by about 0.3% since the April rebalance.
Monday again sees very large buy and sell flows at the close. This is a guide to taking advantage of those flows. Sector tables and a spreadsheet is attached.


TOPIX May Rebalance - The BIG Flows at the Close MONDAY

Quantitative Analysis

<p>In late November, I updated my "JAPAN FLOW:  Foreign Investor Flows Still Matter" series with <a href="https://www.smartkarma.com/insights/japan-flow-foreign-investor-flows-still-matter-redux-reduxed-playing-catchup" target="_blank" data-smartkarma-citation="insights:45711" rel="noopener">JAPAN FLOW:  Foreign Investor Flows Still Matter (Redux, Reduxed) - Playing Catchup</a>.</p><p>The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically based on a relatively simple indicator. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/938/original/Screenshot+2021-02-21+at+6.33.43+PM.png?1613903639" class="editor-image img-responsive" data-smartkarma-image-id="189938"></figure></section><p>This chart shows 26-week cumulative net buying vs the indicator, which moves faster, but if you break down that average into a shorter-term average, it moves "faster" in response to moves in the light blue line. </p><p>My conclusion in late November was that foreigners were "behind the curve" and needed to play catchup. That was despite the fact that they had purchased ¥1.5trln of stocks in the previous four weeks. Since end-November, they have <em>net purchased</em> more than ¥1.7 trillion worth of Japanese equities through 12 February (the data through 19 Feb is not available until 26 February). </p><p>The inputs to the indicator currently suggest it could go either way from here, but as shown in the chart above (the light blue line) it is an oscillator. And generally speaking, when oscillators reach the outer limits of their ranges, they tend to revert. </p><p>And the dark blue line has a ¥1.4trln "tailwind" over the next 7 weeks. </p><div class="content-highlight"><p>But foreign investment flows into Japan are basically a WANT function. They buy more if they want to do so. I often find it instructive to look at flows in terms of WANT vs NEED. NEED is more compelling, and there are some compelling "NEED flows" in the next 6 weeks.</p></div><p>More below the fold.</p>

In late November, I updated my "JAPAN FLOW:  Foreign Investor Flows Still Matter" series with JAPAN FLOW:  Foreign Investor Flows Still Matter (Redux, Reduxed) - Playing Catchup.The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically based on a relatively simple indicator. This chart shows 26-week cumulative net buying vs the indicator, which moves faster, but if you break down that average into a shorter-term average, it moves "faster" in response to moves in the light blue line. My conclusion in late November was that foreigners were "behind the curve" and needed to play catchup. That was despite the fact that they had purchased ¥1.5trln of stocks in the previous four weeks. Since end-November, they have net purchased more than ¥1.7 trillion worth of Japanese equities through 12 February (the data through 19 Feb is not available until 26 February). The inputs to the indicator currently suggest it could go either way from here, but as shown in the chart above (the light blue line) it is an oscillator. And generally speaking, when oscillators reach the outer limits of their ranges, they tend to revert. And the dark blue line has a ¥1.4trln "tailwind" over the next 7 weeks. But foreign investment flows into Japan are basically a WANT function. They buy more if they want to do so. I often find it instructive to look at flows in terms of WANT vs NEED. NEED is more compelling, and there are some compelling "NEED flows" in the next 6 weeks.More below the fold.

JAPAN FLOW:  Foreign Investor Flows Catching Up ('Need' Vs 'Want' into FY-End)

Japan

Sumitomo Realty & Development Co., Ltd. develops, manages, and sells houses and condominiums.  The Company also develops and manages real estates in overseas. Sumitomo Realty & Development undertakes infrastructure projects, manages real estate properties, and provides financing services to its customers.  The Company operates fitness clubs and restaurants as well.

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Sumitomo Realty & Developmen (8830 JP)

Remain Overweight Japan and India; Key Supports Holding; Buys in Energy, Tech/Services (India)

We remain bullish on global equities as long as major $93 support on $ACWI continues to hold (1+ year base support and the 10.5-month uptrend)....

Vermilion Research

The October TOPIX FFW Review and Shinsei Bank (8303)'s Future Float

HYBRID INSIGHT: Shinsei and the October TOPIX FFW Review. Shinsei is now somewhat cheap to largercap peers, but will see 25 days of volume to sell...

Travis Lundy

Last Leg of TOPIX and JPNK400 FFW Rebal - ¥780bn One-Way Flow Wednesday

There are 2+ days until the last stage of the TSE FFW Rebalance is done. This time sees more changes because of increased share cancellation in...

Travis Lundy

TOPIX May Rebalance - The BIG Flows at the Close MONDAY

The TOPIX Rebalance at end-May is upon us. ¥700+bn of buys and ¥700bn of sell flows at the close today (Friday). The big buys are NTT, Sony,...

Travis Lundy

JAPAN FLOW: Foreign Investor Flows Catching Up ('Need' Vs 'Want' into FY-End)

JAPAN FLOW: There are fundamentals, and there are flows. Japan is driven by both. Japan earnings revisions are finally on their way up. Flows have...

Travis Lundy

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