Vermilion Compass: Weekly Equity Strategy
The Pullback Finally Begins; Testing 2-Month SupportsWe have discussed for months that we will need to see the S&P 500 and Nasdaq 100 (QQQ) close below their 20-day MAs/21-day EMAs for more than 2-3 consecutive days in order to get more cautious. While this has not happened yet (only two consecutive days so far, yesterday and Friday), it does appear to be going in that direction as the U.S. dollar (DXY) climbs to test major $106 resistance, and amid 10- and 30-year Treasury yields breaking above long-term resistances. Caution is warranted. Still, in order for there to be a meaningful pullback, important 2-month supports that are currently being tested would need to break, including at 4983-5050 on the S&P 500 and $425-$433 on QQQ (gap supports from 2/22/24). Only then would it open up the possibility for the S&P 500 to move toward major support at 4800. And it is important to note that, even if that scenario plays out, we would view it as a buying opportunity.
S&P 500. 4983-5050 is immediate support to watch on the S&P 500 (gap from 2/22/24). If there is a break below 4983, we expect to see strong support in the 4800-4930 range. As long as 4800 holds, our long-term bullish outlook will remain in place... see chart below.
Market Dynamics Shifting. Certain market dynamics continue to lean bullish, including high yield spreads in a 5-month downtrend, and defensive Sectors underperforming -- Staples (XLP), Health Care (XLV), and Utilities (XLU). Potentially concerning shifts include rising interest rate volatility, the 10- and 30-year Treasury yields breaking above 4.35% and 4.50%, while the U.S. dollar (DXY) is currently testing the critical $106 level. A further rise in Treasury yields and the DXY could become a problem for the S&P 500. Another potential concern is rising WTI crude oil, gasoline, and broad commodity prices, though they both remain below critical resistances of $95 on WTI crude oil, $74.60 on gas (UGA), and $33.20 on the Bloomberg Commodity index (DJP)... see pages 3-4.
Failed Breakouts and Uptrend Violations. Several areas of the market display failed long-term breakouts after getting extended. This is a bearish near-term sign that suggests more consolidation and/or downside is likely. Failed breakouts include Materials (XLB), Financials (XLF), Health Care (XLV), equal-weighted Consumer Discretionary (RSPD), retail (XRT), and MSCI Emerging and Frontier Markets (EEM, FM). There are also a number of 2-5-month uptrend breaks within Sectors that were extended, including Industrials (XLI), Energy (XLE), and Communications (XLC)... see page 5.
Alamos Gold is engaged in the exploration, mine development, and the mining and extraction of precious metals, primarily gold. Co.'s s primary asset is the Mulatos Mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes several known satellite gold occurrences.
Eldorado Gold is engaged in the exploration, development, mining and production of gold and other mining resources in Brazil, China, Turkey and Greece.
Freeport-McMoRan is a holding company. Through its subsidiaries, the company is a mining company. The company operates assets with proven and probable reserves of copper, gold and molybdenum, and the company is a publicly traded copper producer. The company's portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits; and mining operations in North America and South America, including the Morenci minerals district in Arizona and the Cerro Verde operation in Peru. The company has organized its mining operations into four primary divisions: North America copper mines, South America mining, Indonesia mining and Molybdenum mines.
IAMGold is engaged in the exploration for, development and operation of gold mining properties, and the operation of a niobium mine.
Jaguar Mining Inc. (Jaguar) is a gold mining company engaged in acquisition, exploration, development and operation of gold producing properties in Brazil. The Company holds mineral concessions comprising approximately 54,000 hectares in the Iron Quadrangle mining district of Brazil. Its projects include Turmalina, Caete and Paciencia. It holds mineral concessions totaling over 140,332 hectares in the State of Maranhao and over 34,855 hectares in the State of Ceara. Its property portfolio also includes Gurupi Project and Pedra Branca Project. The Paciencia mining complex is located approximately 50 kilometers northwest of Belo Horizonte. The Pedra Branca Project is located in the State of Ceara in northeastern Brazil. The Gurupi Project is located in the state of Maranhao Brazil. The Caete mining complex is located in the state of Minas Gerais Brazil. The Turmalina mining complex is located in the Conceicao do Para municipality in the state of Minas Gerais.
Kinross Gold is engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. As of Dec 31 2013, Co.'s proven mineral reserves for gold and silver were 1,122 ounces and 1,179 ounces respectively.7,883 7,883 7,883
New Gold is a gold producer engaged in gold mining and related activities including acquisition, exploration, extraction, processing and reclamation.
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.
Royal Gold acquires and manages precious metal streams, royalties and similar interests. The company acquires existing stream and royalty interests or finances projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to a portion of revenue or metals produced from the project after deducting specified costs, if any.
Seabridge Gold is a development stage company engaged in the acquisition and exploration of gold properties located in North America.
Southern Copper is a copper producer. The company's mining, smelting and refining facilities are located in Peru and Mexico and the company conducts exploration activities in those countries and in Argentina, Chile and Ecuador. The company's Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper concentrates and molybdenum concentrates, the smelting of copper concentrates to produce blister and anode copper, and the refining of anode copper to produce copper cathodes. The company's Mexican operations are conducted through its subsidiary, Minera Mexico, S.A. de C.V., which engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead.
Taseko Mines is engaged in the exploration, acquisition, development and sale of gold copper, molybdenum, niobium and other related mines within the province of British Columbia, Canada.
Teck Resources is engaged in mining and related activities including exploration, development, processing, smelting and refining. Co.'s major products are steelmaking coal, copper and zinc. Co. also produces precious metals, lead, molybdenum, electrical power, fertilizers and other metals. Co. also owns an interest in certain oil sands leases and have partnership interests in an oil sands development project and wind power project.
Waste Connections is a solid waste services company in North America, providing waste collection, transfer, disposal and recycling services in mostly exclusive and secondary markets in the U.S. and Canada. Through its R360 Environmental Solutions subsidiary, Co. is also a provider of non-hazardous exploration and production (E&P), waste treatment, recovery and disposal services in several of the natural resource producing areas in the U.S. Co. also provides intermodal services for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities.
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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