Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.41 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Risk-Off Signals Abating

In our last Compass (Dec. 22), we pointed out that despite conflicting signals (some neutral or healthy signals but some risk-off signals as well), our bottom line is that we could not be bearish as long as the Russell 2000 index (IWM) is above $208, the Russell Micro Caps index (IWC) is above $134-$135, and the S&P 500 is above 4495. These support levels have held strong, and we are now seeing the aforementioned risk-off signals starting to abate. This is an encouraging sign and we remain constructive as long as the above support levels hold.

Risk-Off Signals Abating. We started to see several risk-off signals popping up during the mid-November to mid-December timeframe, but many of these previously concerning signals have abated in recent weeks. Abating risk-off signals include: (1) High yield spreads have narrowed back below the key 355 bps level. (2) Small- and micro-caps (IWM, IWC) display short-term bullish RS reversals. (3) RS has reacted lower after hitting key resistance levels for defensive Sectors including Consumer Staples (XLP), Utilities (XLU), and Health Care (XLV). (4) The Cyclicals vs. Staples ratio (XLY vs. XLP) held strong above major base support. (5) 10- and 30-year Treasury yields held above key supports of 1.40% and 1.76%, respectively, and are now on the cusp of major breakouts. (6) The global airline ETF (JETS) appears to be breaking back above $21.50... see charts below and pages 3-5.
Gold, Treasuries Hitting New RS Lows. Gold and 20+ year Treasuries are hitting new RS lows relative to the S&P 500. We view this as a risk-on signal, as it tells us stocks are where we want to be invested -- not gold and bonds.
S&P 500. The S&P 500 remains bullish as it held above 4495 support and then proceeded to break out to new highs above 4744 resistance. Considering the breakout following 1.5-months of consolidation, we believe a new leg higher is underway and we expect to see 4875 followed by 4920 (as long as 4744 support holds). Short-term support to watch is at 4744 with bigger support at 4495... see page 3.
Underlyings
American Tower Corporation

American Tower is a holding company. Through its subsidiaries, the company is a real estate investment trusts and an independent owner, operator and developer of multitenant communications real estate. The company's primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. The company also provides tower-related services, including site acquisition, zoning and permitting and structural analysis, which primarily support the company's site leasing business, including the addition of new tenants and equipment on its sites.

Arcadian Partners LP

AUXLY CANNABIS GROUP INC

Auxly Cannabis Group is engaged in the merchant banking business and operates in a single operating segment within Canada. It enables the private companies in which it invests (the "Investee Companies") the ability to issue debt instruments that are eligible for registered plans as defined in the Income Tax Act (Canada). Co. earns fees from the Investee Companies which are independently managed and operated by their respective management companies. Although Co. owns all or a majority of the voting rights in these Investee Companies, it does not have the power to govern the decisions or policies of the Investee Companies.

Brookfield Asset Management Inc. Class A

Brookfield Asset Management is an asset management company, with a particular focus on property, renewable power, infrastructure and public equity. Co. has five reportable segments: (a) Property operations; (b) Renewable power operations; (c) Infrastructure operations; (d) Private equity operations; and (e) Assets management services and other operations.

Calamos Global Convertible & Dynamic Income Trust

CBRE GROUP INC

CBRE Group is a holding company. Through its subsidiaries, the company is a commercial real estate services and investment firm. The company's segments include: Advisory Services, which provides a range of services globally, including property leasing and capital markets; Global Workplace Solutions, which provides a suite of integrated, contractually-based outsourcing services globally for occupiers of real estate; and Real Estate Investments, which is comprised of investment management services provided globally, development services in the United States and United Kingdom and a service designed to help property occupiers and owners meet the demand for flexible office space solutions on a global basis.

CF Industries Holdings Inc.

CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.

CTO REALTY GROWTH INC

Freeport-McMoRan Inc.

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.

Howard Hughes Corporation

Howard Hughes, together with its subsidiaries, operates in three business segments: Operating Assets, Master Planned Communities (MPCs) and Strategic Developments. The company's Operating Assets segment includes its investments in joint ventures and other assets, consisting of retail, office, multi-family, hospitality properties and other operating assets and investments. The company's MPC segment includes the development and sale of residential and commercial land, primarily in large-scale, long-term projects. The company's Strategic Developments segment consists of development or redevelopment projects.

ICL Group Ltd.

Israel Chemicals, through its subsidiaries, extracts raw materials and utilizes processing and product formulation technologies to add value to customers in the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics, medicines and vehicles. Co. operates two segments: Essential Minerals and Specialty Solutions. The Essential Minerals segment includes the ICL Potash & Magnesium, ICL Phosphate and ICL Specialty Fertilizers business lines. The Specialty Solutions segment includes four business lines: ICL Industrial Products; ICL Specialty Fertilizers; ICL Advanced Additives and ICL Food Specialties.

Intrepid Potash

Invitation Homes Inc.

Invitation Homes is an owner and operator of single-family homes for lease, providing residents homes in neighborhoods across America. The company operates primarily in the Western United States, Florida, and the Southeast United States. The company has one reportable segment related to acquiring, renovating, leasing, and operating single-family homes as rental properties.

iShares Micro-Cap ETF

iShares Russell 2000 Index Fund

Jones Lang LaSalle Incorporated

Jones Lang LaSalle is a professional services firm that engages in real estate and investment management. The company delivers an array of services across four business segments. The company manage its Real Estate Services offerings across three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific, and the company manages its investment management business globally as LaSalle Investment Management. In its Americas, EMEA and Asia Pacific operating segments, the company provides a range of leasing, capital markets, integrated property and facility management, project management, advisory, consulting, valuations and digital solutions services.

Marcus & Millichap Inc.

Marcus & Millichap is a brokerage firm focusing on commercial real estate investment sales, financing, research and advisory services. The company's investment sales and financing personnel provides real estate brokerage and financing services to sellers and buyers of commercial real estate. The company also provides market research, consulting and advisory services to its clients. The company's services include Commercial Real Estate Investment Brokerage, Financing and Ancillary Services: Research, Advisory and Consulting.

Mosaic Company

Mosaic is a producer and marketer of concentrated phosphate and potash crop nutrients. The company is organized into three reportable business segments: Phosphates, which owns and operates mines and production facilities in Florida that produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and processing plants in Louisiana that produce concentrated phosphate crop nutrients; Potash, which mines and processes potash in Canada and the United States and sells potash in North America and internationally; and Mosaic Fertilizantes, which produces and sells concentrated phosphates crop nutrients, phosphate-based animal feed ingredients and potash fertilizer.

Preferred Apartment Communities Inc.

Preferred Apartment Communities is a real estate investment trust that conducts its business through its Operating Partnership. The company operates in five segments: multifamily communities, which consists of the company's portfolio of owned residential multifamily communities; student housing properties, which consists of the company's portfolio of owned student housing properties, financing, which consists of the company's portfolio of real estate loans, bridge loans, and other instruments deployed by the company; new market properties, which consists of the company's portfolio of grocery-anchored shopping centers; and preferred office properties, which consists of the company's portfolio of office buildings.

SBA Communications Corp. Class A

SBA Communications is a holding company. Through its subsidiaries, the company is an owner and operator of wireless communications infrastructure, including tower structures, rooftops, and other structures that support antennas used for wireless communications. The company's operations are in the U.S. and its territories. In its site leasing business, the company leases antenna space to wireless service providers on towers that the company owns or operates and manages rooftop and tower sites for property owners under various contractual arrangements. In its site development business, the company assists wireless service providers in developing and maintaining their own wireless service networks.

Select Sector SPDR-Consumer Staples

St. Joe Company

St. Joe is a real estate development, asset management and operating company with real estate assets and operations concentrated in Northwest Florida. The company has four segments: residential real estate, which plans and develops residential communities across a range of price points and sells homesites to builders or to retail consumers; hospitality, which features hotel operations, lodging, restaurants, golf courses, beach clubs, marinas and other resort assets; commercial leasing and sales, which includes leasing retail, office and commercial property, cell towers, and other assets; and forestry, which grows and sells pulpwood, sawtimber, and other forest products.

Taranis Resources Inc.

Taranis Resources is an exploration stage company. Co. is in the process of acquiring and exploring its mineral properties and has not yet determined whether the properties contain ore reserves that are economically recoverable.

Teck Resources Limited Class B

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.

US GBL JETS ETF

Provider
Vermilion Research
Vermilion Research

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.

Analysts
Dave Nicoski

Ross LaDuke

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