Vermilion Compass: Weekly Equity Strategy
Rotation is the Lifeblood of a Bull MarketSemiconductors (SMH, SOXX, NVDA, AVGO, etc.) have been leadership since late-2022, but they are extended and are starting to see some profit taking as market participants rotate into other areas of the market that have been lagging (especially Energy, and to a lesser extent banks and small-caps). The question is whether this new trend lasts a few days, or if this is the start of longer-term trend. We would not be surprised to see more consolidation for semiconductors/Technology in the coming weeks, which would likely mean more consolidation for the S&P 500 and Nasdaq 100. That is, unless other mega-caps such as GOOGL, META, AMZN, TSLA, and MSFT can pick up the slack. As long as we continue to see Sector rotation as prior leadership pauses/consolidates, we view this as exactly what we would expect to see in an ongoing bull market. After all, rotation is the lifeblood of a bull market. Considering market dynamics still suggest a risk-on environment, our bullish outlook (since early-November 2023) remains intact.
S&P 500, Nasdaq 100, Russell 2000. We remain bullish on the S&P 500 and Nasdaq 100 (QQQ) as uptrends remain intact; the formation of new uptrends has been our expectation since late-April (4/30/24 Compass). Near-term we continue to expect to see support at the 20-day MA and 21-day EMA on the SPX (currently 5370-5380) and QQQ (currently $468-469). These are strong support levels, as it also coincides with upside gaps from June 12. Longer-term, we are bullish as long as the SPX is above 5191 and the QQQ is above $449. We would need to see breakdowns below these levels in order to alter our view to neutral. The Russell 2000 (IWM) remains constructive as it continues to form a high base while holding above $199 support. Longer-term, we are constructive on the IWM as long as it remains above $188-$190 support... see chart below and page 3.
Big Picture Trends. Market dynamics continue to suggest a risk-on environment, leading us to believe that IF a 5-10% SPX pullback were to happen, it would be a buying opportunity. High yield spreads remain at multi-year narrows and are below 382bps "resistance," the MOVE index remains at 2.25-year lows, and Treasury yields are trending lower. Even the "concerning" developments (rising crude oil, gasoline, and DXY) are not really all that concerning, as they all remain below multi-year resistances... see pages 4-5.
Burlington Stores is a holding company. Through its indirect subsidiary, Burlington Coat Factory Warehouse Corporation sells merchandise including: women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, baby, home, coats, beauty, toys and gifts. The company operates stores under the names Burlington Stores, Cohoes Fashions, Super Baby Depot, MJM Designer Shoes and an online store. Cohoes Fashions provides products similar to those offered by Burlington Stores. MJM Designer Shoes provides moderately priced designer and fashion shoes. The Super Baby Depot stores provides baby clothing, accessories, furniture and other merchandise in the middle to higher price range.
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.
Denali Therapeutics is a biopharmaceutical company that discovers and develops therapeutics to defeat neurodegenerative diseases. The company's target indications include diseases, such as Alzheimer's disease and Parkinson's disease, as well as orphan indications, such as mucopolysaccharidosis type II, and amyotrophic lateral sclerosis. The company's Transport Vehicle technology enables several classes of biotherapeutics to cross the blood-brain barrier (BBB), including enzymes, antibodies, proteins and oligonucleotides. This technology is designed to engage BBB transport receptors, which are expressed in brain capillaries and facilitate transport of proteins into the brain.
Halozyme Therapeutics is a biopharma technology platform company that provides solutions to improve patient experience and outcomes. The company's approved product and its collaborators' approved products and product candidates are based on rHuPH20, its patented recombinant human hyaluronidase enzyme. The company refers to the application of rHuPH20 to facilitate the delivery of other drugs or fluids as its ENHANZE? Drug Delivery Technology (ENHANZE). The company licenses the ENHANZE technology to form collaborations with biopharmaceutical companies that develop or market drugs requiring or benefiting from injection via the subcutaneous route of administration.
Intra-Cellular Therapies is a biopharmaceutical company focused on the discovery and clinical development of small molecule drugs that address medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system. The company's primary product candidate, Lumateperone is for the treatment of acute and residual schizophrenia, and for the treatment of bipolar disorder, including bipolar depression. The company's pipeline also includes preclinical programs that are focused on developing drugs for the treatment of schizophrenia, Parkinson's disease, Alzheimer's disease and other neuropsychiatric and neurodegenerative disorders.
Ionis Pharmaceuticals is engaged in discovering and developing RNA-targeted therapeutics. The company has two commercial medicines, SPINRAZA and TEGSEDI. SPINRAZA (nusinersen) injection for intrathecal use is a survival motor neuron-2, directed antisense oligonucleotide indicated for the treatment of spinal muscular atrophy in pediatric and adult patients. TEGSEDI (inotersen) injection is a Generation 2+ antisense medicine and an approved subcutaneous RNA-targeting medicine designed to treat people with polyneuropathy caused by hereditary transthyretin amyloidosis.
Madrigal Pharmaceuticals is a clinical-stage biopharmaceutical company focused on the development and commercialization of therapeutic candidates for the treatment of cardiovascular, metabolic and liver diseases. The company's main product candidate, MGL-3196 (resmetirom), is a proprietary, orally administered, small molecule, liver-directed, thyroid hormone receptor-? selective agonist being developed as a once-daily oral pill that can potentially be used to treat a number of disease states including non-alcoholic steatohepatitis.
Neurocrine Biosciences is a commercial-stage biopharmaceutical company focused on discovering and developing treatments for patients with neurological, endocrine and psychiatric disorders. The company is primarily focused on the commercialization of INGREZZA? (valbenazine) in the United States. The company's late-stage pipeline includes opicapone as an adjunctive therapy to levodopa/DOPA decarboxylase inhibitors in adult Parkinson's disease patients, elagolix for the treatment of heavy menstrual bleeding associated with uterine fibroids in women, valbenazine for the treatment of chorea in adult patients with Huntington's disease and NBIb-1817 (VY-AADC) for the treatment of Parkinson's disease patients.
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.
Rollins is an international service company providing pest and termite control services through its wholly-owned subsidiaries to both residential and commercial customers in the United States, Canada, Australia, Europe, and Asia. The company's subsidiary, Orkin, LLC provides pest control services and protection against termite damage, rodents and insects to homes and businesses. The company's other subsidiaries include Orkin Canada, a pest control provider in Canada; Western Pest Services, a commercial pest control service company; and The Industrial Fumigant Company, a provider of pest management and sanitation services and products.
Ross Stores and its subsidiaries operate two brands of off-price retail apparel and home fashion stores, which are Ross Dress for Less? (Ross) and dd's DISCOUNTS?. Ross provides name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. dd's DISCOUNTS provides name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day. Both of the company's Ross and dd's DISCOUNTS brands target women and men between the ages of 18 and 54.
Tetra Tech provides consulting and engineering services that focuses on water, environment, infrastructure, resource management, energy, and international development. The company's segments are: Government Services Group, which supports United States government civilian and defense agencies with services in water, environment, infrastructure, information technology, and emergency management services; and Commercial/International Services Group, which provides infrastructure and related environmental and geotechnical services, testing, engineering and project management services to commercial and local government clients in Canada, Asia Pacific, the United Kingdom, as well as Brazil and Chile.
TJX Companies is an off-price apparel and home fashions retailer. The company's segments comprised of: Marmaxx, which sells family apparel (including footwear and accessories), home fashions (including home basics, decorative accessories and giftware) and other merchandise; HomeGoods, which provides a range of home fashions, including home fashions, including furniture, rugs, lighting, soft home, decorative accessories, tabletop and cookware as well as pet, kids and gourmet food departments; TJX Canada, which operates the Winners, HomeSense and Marshalls chains in Canada; and TJX International, which operates the T.K. Maxx and HomeSense chains in Europe and the T.K. Maxx chain in Australia.
United Therapeutics is a biotechnology company. The company markets and sells four commercial therapies to treat pulmonary arterial hypertension (PAH): Remodulin? (treprostinil) Injection; Tyvaso? (treprostinil) Inhalation Solution; Orenitram? (treprostinil) Extended-Release Tablets; and Adcirca? (tadalafil) Tablets. The company also markets and sells an oncology product, Unituxin? (dinutuximab) Injection for treatment of high-risk neuroblastoma. The company also engages in research and development of new indications and formulations and delivery devices for its existing products, as well as new products to treat PAH and other conditions. The company also engages in organ transplantation-related technologies.
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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