Vermilion Compass: Weekly Equity Strategy
Shifting to Neutral Near-Term as Chop ContinuesWe are shifting our near-term outlook to neutral on the S&P 500 (SPX), after being bullish for all but one week since 4/22/25 (we went neutral 11/19/25-11/25/25). Choppy consolidation has continued between support at 6780-6824 and resistance at 7000, and a neutral near-term outlook is appropriate until there is a decisive break in either direction. The Russell 2000 (IWM) remains much more attractive, and we remain constructive near-term on IWM as long as support of $255-$257 holds. While we intended to wait for SPX to break below 6780 to downgrade our near-term outlook, continued deterioration in market dynamics leads us to believe that a breakout above 7000 is unlikely, and has us concerned of a deeper pullback, likely to 6720-6776, 6690, or 6480-6520 on SPX. 6780-6824 support would still need to break to give us confidence that the pullback has begun. Our intermediate-term bullish outlook has been in place since our 5/14/25 Compass. We will maintain our bullish intermediate-term outlook, and recommend buying pullbacks, as long as market dynamics remain constructive and the SPX is above 6480-6520 and IWM is above $245. SPX supports include 6824, 6780-6800, 6720-6770, 6690, and 6480-6520.
Market Dynamics Deteriorating. SPX remains rangebound between 7000 and 6780-6824; it appears another rally toward 6950-7000 could be in the cards, but we put a low probability on a breakout, and ultimately believe a break below 6780 is more probable, followed by a test of 6720-6770, 6690, or even 6480-6520, at which point we will reassess our outlook. Concerns include: (1) Defensive Sectors including Staples (XLP), Utilities (XLU), and Real Estate (XLRE) are at 4+ month RS highs, while Energy (XLE) and Materials (XLB) are also leadership, a late-cycle warning. (2) High yield spreads are at 8-month wides and testing the key 320bps level. (3) Interest rate volatility (MOVE index) is at 2.5-month highs. (4) The U.S. dollar (DXY) has held above $96.40 support following the bullish false breakdown on DXY in late-Jan., and is now breaking above $97.75 resistance en route to $100. (5) The QQQ displays a 9-month uptrend violation. (6) Bitcoin remains long-term bearish. (7) WTI crude oil (USO), broad commodities (DJP), and gasoline prices (UGA) remain long-term bullish following major multi-year breakouts (stay long)... see chart below and pages 2-4.
Monitoring Treasury Yields, IWM, DXY, and SMH. We are monitoring the 10-year Treasury yield for a potential bottom at 3.93% support. We also cannot get too bearish as long as (1) the Russell 2000 (IWM) remains above $245, (2) the U.S. dollar (DXY) remains below $100.25-$100.80, and (3) semiconductors (SMH) remain above $365-$375 base support.
AmerisourceBergen is a pharmaceutical sourcing and distribution services company. The company's Pharmaceutical Distribution Services reportable segment provides pharmaceutical distribution and additional services to physicians who focus on a variety of disease states, especially oncology, and to other healthcare providers, including hospitals and dialysis clinics. Additionally, this segment provides data analytics, outcomes research, and additional services for biotechnology and pharmaceutical manufacturers. This segment also provides pharmacy management, staffing and additional consulting services, and supply management software to a variety of retail and institutional healthcare providers.
Cardinal Health is a healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. The company's segments include: Pharmaceutical and Medical. The company's Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products in the United States. The company's Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets.
Clean Harbors is a provider of environmental, energy and industrial services throughout North America. The company collects, transports, treats and disposes of hazardous and non-hazardous waste, including resource recovery, physical treatment, fuel blending, incineration, landfill disposal, wastewater treatment, lab chemical disposal, explosives management and CleanPack? services. The company's Safety-Kleen business provides an array of environmental services and complementary products to a range of customers including automobile repair shops, car and truck dealers, metal fabricators, machine manufacturers, fleet maintenance shops and other automotive, industrial and retail customers.
Energy Fuels is engaged in uranium mining, milling, development, and exploration with operating uranium mines, mines on standby, development projects and exploration properties located in the United States. Co.'s assets include its 100% ownership of the White Mesa Mill in Utah. Co. also produces vanadium as a co-product from some of its mines in Colorado and Utah. In addition, Co. recycles uranium-bearing waste materials, referred to as "alternate feed materials", for the recovery of uranium, alone or in combination with other metals, at its White Mesa Mill.
McKesson provides pharmaceuticals and medical supplies and services to its customers. The company's segments include: U.S. Pharmaceutical and Specialty Solutions, which provides distribution and logistics services for branded, generic, specialty, biosimilar and over-the-counter pharmaceutical drugs and other healthcare-related products to customers; European Pharmaceutical Solutions, which provides distribution and services to wholesale, institutional and retail customers in European countries where it owns, partners or franchises with retail pharmacies; and Medical-Surgical Solutions, which delivers medical-supply distribution, logistics, biomedical and other services to healthcare providers.
Reinsurance Group of America is an insurance holding company. Through its subsidiaries, the company is a provider of life and health reinsurance and financial solutions. The company is engaged in providing reinsurance, which includes individual and group life and health, disability, and critical illness reinsurance. The company also provides financial solutions, which includes longevity reinsurance, asset-intensive products, primarily annuities, financial reinsurance, capital solutions and stable value products. The company has five geographic-based and business-based operational segments: United States and Latin America, Canada, Europe, Middle East and Africa, Asia Pacific, and Corporate and Other.
RenaissanceRe Holdings is a holding company. Through its subsidiaries, the company is a global provider of reinsurance and insurance. The company's segments are: Property, which includes its catastrophe class of business, comprising excess of loss reinsurance and excess of loss retrocessional reinsurance to insure insurance and reinsurance companies against natural and man-made catastrophes, and its other property class of business, comprising proportional reinsurance, property per risk, property (re)insurance, binding facilities and regional United States multi-line reinsurance; and Casualty and Specialty, in which the company provides its casualty and specialty reinsurance products and excess of loss coverage.
Republic Services is a provider of non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States. The company operates through collection operations, transfer stations, active landfills, recycling processing centers, treatment, recovery and disposal facilities, salt water disposal wells, and deep injection wells. In addition, the company is engaged in landfill gas-to-energy and renewable energy projects and had post-closure responsibility for closed landfills. The company's operations primarily consist of providing collection, transfer and disposal of non-hazardous solid waste, recovering and recycling of certain materials, and environmental services.
Waste Management is a holding company. Through its subsidiaries, the company is a provider of waste management environmental services. The company partners with its residential, commercial, industrial and municipal customers and the communities it serves to manage and reduce waste at each stage from collection to disposal, while recovering resources and creating renewable energy. The company's Solid Waste business is operated and managed by its subsidiaries that focus on various geographic areas and provide collection, transfer, disposal, and recycling and resource recovery services. Through its subsidiaries, the company is also a developer, operator and owner of landfill gas-to-energy facilities.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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