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've discussed since late Sept increasing odds of a pullback to confluence of support at 4165-4200/the 200-day MA on SPX, and that if this support holds, it's a normal pullback</li>
<li>Ongoing market dynamics allow us to be even more confident in our unchanged outlook; 4216 was the low for this pullback, with 4200 getting hit overnight (early Wednesday last week).</li>
<li>The broad equity market is not yet out of the woods, but as long as the SPX is above 4165-4200 and the 200-day MA, we are bullish.</li>
</ul>


We've discussed since late Sept increasing odds of a pullback to confluence of support at 4165-4200/the 200-day MA on SPX, and that if this support holds, it's a normal pullback
Ongoing market dynamics allow us to be even more confident in our unchanged outlook; 4216 was the low for this pullback, with 4200 getting hit overnight (early Wednesday last week).
The broad equity market is not yet out of the woods, but as long as the SPX is above 4165-4200 and the 200-day MA, we are bullish.


Growing Confidence That the Lows Are In; 4165-4200/200-Day MA on SPX Remains Key; Buys in Financials

Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Macroeconomics

<ul><li>The US CPI in May 2023 may have benefited from the high base YoY, and it could have weakened on a MoM basis due to the 11.3% MoM decline in global crude oil prices in May.</li><li>KTX expects US CPI in May to have slowed down to a greater extent than the +4.7% YoY forecast by the market, as the time-lag effect of shelter prices may have already dissipated, and they could have peaked out in February 2023, in line with house prices that had fallen earlier.</li><li>US inflation in 2H23E may fall at a slower pace than in 1H23, as the MoM acceleration remains high, with the 4M23 average at +0.35% MoM, higher than the base case at +0.30% MoM.</li></ul>

The US CPI in May 2023 may have benefited from the high base YoY, and it could have weakened on a MoM basis due to the 11.3% MoM decline in global crude oil prices in May.KTX expects US CPI in May to have slowed down to a greater extent than the +4.7% YoY forecast by the market, as the time-lag effect of shelter prices may have already dissipated, and they could have peaked out in February 2023, in line with house prices that had fallen earlier.US inflation in 2H23E may fall at a slower pace than in 1H23, as the MoM acceleration remains high, with the 4M23 average at +0.35% MoM, higher than the base case at +0.30% MoM.

Cross Asset Strategy

<ul><li>According to the Global Fund Manager Survey of 289 fund managers with NAV of USD753bn by Bank of America during May 5-11, most remained concerned about US economic growth, with 47% expecting a recession.</li><li>Hence, investors continue to focus on holding cash and bonds rather than equities (and are rotating to technology, EU assets & equities instead of commodities, utilities, and EM and US assets).</li><li>We recommend that investors underweight reopening stocks as tourist arrivals may enter the slow-growth mode and overweight the banking and export sectors (given the higher GDP growth prospects), as well as the finance and real estate sectors (as bond yields are moving on a downtrend), due to the likelihood that Thai economic growth will accelerate, with the BoT projecting 2023-24E GDP growth at 3.6% YoY and 3.8% YoY, respectively.</li></ul>

According to the Global Fund Manager Survey of 289 fund managers with NAV of USD753bn by Bank of America during May 5-11, most remained concerned about US economic growth, with 47% expecting a recession.Hence, investors continue to focus on holding cash and bonds rather than equities (and are rotating to technology, EU assets & equities instead of commodities, utilities, and EM and US assets).We recommend that investors underweight reopening stocks as tourist arrivals may enter the slow-growth mode and overweight the banking and export sectors (given the higher GDP growth prospects), as well as the finance and real estate sectors (as bond yields are moving on a downtrend), due to the likelihood that Thai economic growth will accelerate, with the BoT projecting 2023-24E GDP growth at 3.6% YoY and 3.8% YoY, respectively.

Still Pessimistic on US Economic Outlook (Raised Cash & Bond Holdings and Reduced Equities)

<ul><li>We recommend accumulating when the SET Index weakens based on the expectation that it will not be impacted by the collapses of US banks (i.e., no domino effect), as Thai financial institutions are strong, with low NPLs and no lending exposure to crypto clients.</li><li>The SET may instead benefit from the possibility that the Fed will slow down the hikes in the fed funds rate to curb inflation – the CME Group's Fed Watch Tool now suggests a lower terminal rate at 5-5.25%, followed by an interest rate downtrend to 3.5-3.75% by the end of 2024E.</li><li>We view that the instability in the US banking sector will encourage fund outflows from US markets toward other equity markets, such as the SET.</li></ul>

We recommend accumulating when the SET Index weakens based on the expectation that it will not be impacted by the collapses of US banks (i.e., no domino effect), as Thai financial institutions are strong, with low NPLs and no lending exposure to crypto clients.The SET may instead benefit from the possibility that the Fed will slow down the hikes in the fed funds rate to curb inflation – the CME Group's Fed Watch Tool now suggests a lower terminal rate at 5-5.25%, followed by an interest rate downtrend to 3.5-3.75% by the end of 2024E.We view that the instability in the US banking sector will encourage fund outflows from US markets toward other equity markets, such as the SET.

US Bank Collapses May Create Chance for SET Rebound

<ul><li>The Fed will remain hawkish despite lower inflation in July (Core PCE at +4.6% vs. 4.8% in June), which will weigh on the growth in the economy and labor market.</li><li>There have not been clear signals indicating whether the Fed will hike rates by 50 or 75 bps; CME's FedWatchTool still expects a hike by 75 bps.</li><li>Markets viewed the Fed's messages as a negative surprise (S&P 500-3.4%, DJIA -3.0%, NASDAQ -3.9%).</li></ul>

The Fed will remain hawkish despite lower inflation in July (Core PCE at +4.6% vs. 4.8% in June), which will weigh on the growth in the economy and labor market.There have not been clear signals indicating whether the Fed will hike rates by 50 or 75 bps; CME's FedWatchTool still expects a hike by 75 bps.Markets viewed the Fed's messages as a negative surprise (S&P 500-3.4%, DJIA -3.0%, NASDAQ -3.9%).

Fed Remains Hawkish; Market Expects Rate Hike by 75 Bps

United States

CME Group Inc. operates a derivatives exchange that trades futures contracts and options on futures, interest rates, stock indexes, foreign exchange and commodities.  The Exchange brings together buyers and sellers of derivatives products on its trading floors, electronic trading platform, and through privately negotiated transactions that it clears.

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CME Group (CME US)

Growing Confidence That the Lows Are In; 4165-4200/200-Day MA on SPX Remains Key; Buys in Financials

Our confidence in our outlook is growing: as long as the $SPX is above 4165-4200 and the 200-day MA, most signs point to this being a normal...

Vermilion Research

Expect Positive Surprises From the US

The US CPI in May 2023 may have benefited from the high base YoY, and it could have weakened on a MoM basis due to the 11.3% MoM decline in global...

Krungthai XSpring

Still Pessimistic on US Economic Outlook (Raised Cash & Bond Holdings and Reduced Equities)

According to the Global Fund Manager Survey of 289 fund managers with NAV of USD753bn by Bank of America during May 5-11, most remained concerned...

Krungthai XSpring

US Bank Collapses May Create Chance for SET Rebound

We recommend accumulating when the SET Index weakens based on the expectation that it will not be impacted by the collapses of US banks (i.e., no...

Krungthai XSpring

Fed Remains Hawkish; Market Expects Rate Hike by 75 Bps

The Fed will remain hawkish despite lower inflation in July (Core PCE at +4.6% vs. 4.8% in June), which will weigh on the growth in the economy...

Krungthai XSpring

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