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

Vermilion Compass: Weekly Equity Strategy

Russell 2000 Testing 1.5+ Year Resistance

The market remains in "lockout rally" mode, where prices continue to move higher with little-to-no pullbacks, while ignoring overbought readings. This is something we have discussed on a weekly basis since our 11/21/23 Compass. There is no reason to fight this bullish trend, and we continue to expect more upside into year-end and the early part of 2024.

Russell 2000, Several High-Octane ETFs (ARKK, IPO, XBI) Testing Major 1.5+ Year Resistances. The Russell 2000 (IWM) is approaching 1.5+ year resistance at $198-$200, while several other high-octane ETFs are also testing 1.5+ year resistance ($52.50 on ARKK, $37 on IPO, and $88.50 on XBI). Some short-term consolidation here makes sense, but if all we get is some healthy consolidation with minor selling pressure -- perhaps a flag or wedge-type pattern -- we would not be surprised to see all of these areas of the market break out. As long as $193.50-$196 support holds on IWM, and no lower than $190, we would view it as a "healthy" consolidation. This is certainly a time to be on guard, since the normal "higher odds" expectation would be for a rejection at a major resistance level. However, the trend and market dynamics remain unmistakably bullish, leading us to believe breakouts are likely coming... see charts below and page 3.
Breakouts Continue to Pile Up. The S&P 500 and Nasdaq Composite breakouts above 4600-4607 and 14,400 has resulted in both indexes taking off. These levels remain critical supports moving forward. Additional areas of the market that display major breakouts since last week's Compass (12/13/23) include the DJI (breakout to all-time highs), Consumer Discretionary (XLY), Industrials (XLI), Real Estate (XLRE), and banks (KRE, KBE). This is the type of behavior we would expect to see in a bull market... see pages 4-5.
Additional Bullish Dynamics. Multi-month downtrends remain firmly intact on the U.S. dollar (DXY) and Treasury yields, and there are no signs of them bottoming at this point in time; as long as the DXY and yields are moving sideways to lower, we continue to view it as a risk-on signal. Additionally, RS is hitting new lows for defensive Sectors including Staples (XLP), Utilities (XLU), and Health Care (XLV) -- another risk-on signal.
Underlyings
ATS CORPORATION

Banco BBVA Argentina SA Sponsored ADR

Banco Bradesco S.A. ADS,

Banco de Chile ADS

Banco Latinoamericano de Comercio Exterior S.A. Class E

Banco Macro SA Sponsored ADR Class B

Banco Santander Brazil S.A. ADS

Brady Corporation Class A

Brady is a manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The company is organized within two segments: Identification Solutions, which includes industrial and healthcare identification products in several categories, including facility identification and protection, product identification, wire identification, people identification, patient identification, and custom wristbands; and Workplace Safety, which includes workplace safety and compliance products in several categories, including safety and compliance signs, tags, and labels, informational signage, asset tracking labels, and first aid products.

CRANE CO NEW

Federal Signal Corporation

Federal Signal designs, manufactures and supplies products and solutions for municipal, governmental, industrial and commercial customers. Products manufactured and supplied, and services rendered, by the company are divided into two segments: Environmental Solutions Group, which manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks, waterblasting equipment, dump truck bodies and trailers; and Safety and Security Systems Group, which manufactures and supplies systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities and industrial sites use to protect people and property.

Grupo Financiero Galicia SA Sponsored ADR Class B

HSC Technology

Antilles Oil & Gas NL is engaged in the acquisition, exploration and development of petroleum and gas properties in Ukraine.

Itau Unibanco Holding S.A. Sponsored ADR Pfd

ITT Inc.

ITT is a manufacturer of engineered components and customized technology solutions for the transportation, industrial, and oil and gas markets. The company's segments are: Motion Technologies, which manufactures brake pads, shims, shock absorbers, energy absorption components, and sealing technologies; Industrial Process, which provides a portfolio of industrial pumps, valves, and plant optimization systems and services; and Connect and Control Technologies, which designs and manufactures a range of connectors and products for applications supporting various markets including aerospace and defense, industrial, transportation, medical, and oil and gas.

Kadant Inc.

Kadant is a supplier of equipment and components used in process industries worldwide. Through its Papermaking Systems segment, the company develops, manufactures, and markets equipment and products for the global papermaking, paper recycling, recycling and waste management, and other process industries. Through its Wood Processing Systems segment, the company develops, manufactures, and markets stranders and related equipment used in the production of oriented strand board. Through its Fiber-based Products business, the company manufactures and sells granules derived from papermaking by-products for use as carriers for agricultural, home lawn and garden, and lawn, turf and ornamental applications.

Nucor Corporation

Nucor manufactures steel and steel products. The company's operations include international trading and sales companies that buy and sell steel and steel products. The company's segments are: steel mills, which produces sheet steel, plate steel, structural steel, and bar steel; steel products, which produces hollow structural section steel tubing, electrical conduit, steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems, and wire and wire mesh; and raw materials, which produces direct reduced iron (DRI), brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI, supplies ferro-alloys, and processes ferrous and nonferrous scrap metal.

Olympic Steel Inc.

Olympic Steel is a metals service center that operates in three segments; carbon flat products, specialty metals flat products, and tubular and pipe products. The company's carbon flat products segment's focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. The company's specialty metals flat products segment's focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. The company distributes metal tubing, pipe, bar, valves and fittings and fabricate pressure parts through its tubular and pipe products segment.

Reliance Steel & Aluminum Co.

Reliance Steel & Aluminum is a metals service center company. The company provides metals processing services and distributes a line of metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products, to its customers in a range of industries, including general manufacturing, non-residential construction (including infrastructure), transportation (rail, truck trailer and shipbuilding), aerospace and defense, energy (oil and gas), electronics and semiconductor fabrication, and heavy industry (agricultural, construction and mining equipment). The company also services the auto industry, primarily through its toll processing operations.

SPX TECHNOLOGIES INC

Standex International Corporation

Standex International is a manufacturing company. The company's segments include: Food Service Equipment, which provides refrigeration, display merchandising and component pumps for the Commercial Food Service and Life Sciences markets; Engraving, which creates textures and surface finishes on tooling; Engineering Technologies, which provides metal-formed solutions for Original Equipment Manufacturers and Tier-1 manufacturers; Electronics, which provides custom magnetic sensing and power conversion components and assemblies; and Hydraulics, which manufactures mobile hydraulic cylinders and complete hydraulic systems for the heavy off-road construction and refuse markets.

Steel Dynamics Inc.

Steel Dynamics is a steel producer and metal recycler. The company manufactures and sells steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joists and deck products. The company's segments are: Steel, which produces steel from ferrous scrap and scrap substitutes, utilizing casting, automated rolling mills and several downstream steel coating and bar processing lines, and Iron Dynamics; metals recycling, which involves the purchase, processing, and resale of ferrous and nonferrous scrap metals into reusable forms and grades; and steel fabrication, which produces steel building components, including steel joists, girders, trusses, and steel deck.

TimkenSteel Corp

TimkenSteel manufactures alloy steel, carbon and micro-alloy steel. The company's portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing, solutions such as precision steel components, and billets. In addition, the company supplies machining and thermal treatment services, and the company manages raw material recycling programs. The company's products and services are used in the following market sectors: oil and gas; oil country tubular goods; automotive; industrial equipment; mining; construction; rail; aerospace and defense; heavy truck; agriculture; and power generation. The company's products include: SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets; and Precision Products and Services.

United States Steel Corporation

United States Steel is a steel producer of flat-rolled and tubular products with production operations in the United States and Europe. The company is also engaged in railroad services and real estate operations. The company's segments are: North American Flat-Rolled, which produces slabs, strip mill plates, sheets and tin mill products; U. S. Steel Europe, which produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe, as well as heating radiators and refractory ceramic materials; and Tubular Products, which produces and sells electric resistance welded steel casing and tubing (known as oil country tubular goods), and standard and line pipe and mechanical tubing.

Worthington Industries Inc.

Worthington Industries is a metals manufacturing company, focused on steel processing and manufactured metal products. The company operates three segments: Steel Processing, which buys coils of steel from integrated steel mills and mini-mills and processes them to customer specifications; Pressure Cylinders, which manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, well water and expansion tanks, and oil and gas equipment with accessories and related products for end-use market applications; and Engineered Cabs, which designs and manufactures custom-engineered open and enclosed cabs and operator stations and custom fabrications and packaging for mobile equipment.

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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