Vermilion Compass: Weekly Equity Strategy
Downgrading Health Care to UnderweightOur outlook remains bullish following the S&P 500's multi-month base breakout above 5670-5783, alongside constructive market dynamics. The market is quite clearly telling us that the path of least resistance is higher. We would treat any pre-election pullback (if it comes) as a buying opportunity, and we expect to see support on the SPX at 5760 and 5655-5670. The prior two election years (2016 and 2020) saw 5% and 10% pullbacks, respectfully, during September/October; this year's 10% pullback came a bit earlier (in July/August), and leads us to believe any additional pullback will be minimal (if at all). Once past the election, we believe there will be a strong end-of-year rally that will extend into the early part of 2025. End-of-year seasonal tendencies are extremely bullish during years where the SPX has already rallied significantly (+22.1% YTD).
Downgrading Health Care to Underweight. We are downgrading Health Care to underweight; RS on the cap-weighted XLV and equal-weighted RSPH are breaking to YTD lows – reduce exposure/be selective. We view new RS lows on the XLV (a defensive Sector) as yet another risk-on signal that helps support our bullish outlook... see charts below and page 2.
Bullish Market Dynamics. Aside from the many breakouts (e.g., SPX, QQQ, VXF, NVDA, IGV, XLK, BKW Bank index, ARKW, ARKF, ARKK, IPO, JETS, BITQ, and WGMI) and meaningful RS deterioration for several defensive Sectors (including new YTD RS lows on the XLV), additional risk-on market dynamics which support our bullish outlook include: (1) High yield spreads are at 3-year narrows; a HUGE risk-on signal. (2) Not one Sector is bearish from a price perspective. (3) Breadth remains healthy. (4) Bitcoin displays an 8-month base breakout above $69,200 -- buy/stay long. (5) Gold remains bullish and silver displays a 5-month base breakout... see pages 3-4.
Concerns Are Few and Far Between. Our primary remaining concerns include rising bond market volatility (MOVE index at 1-year highs) and the fact that Russell 2000 (IWM) small-caps remain below $227-229 resistance. With that said, signs are pointing to a likely breakout in the coming weeks above $229 on the IWM -- and that is our expectation. Additionally, the rising U.S. dollar (DXY) and Treasury yields has not been a problem for the broad equity market, because it has largely been due to strong economic data (GDP and employment). Moreover, the trend for Treasury yields across the curve remains sideways-to-lower over the past year... see page 5.
Americas Silver is engaged in the acquisition, exploration, development and exploitation of mineral resource properties in Mexico and the United States. Co. explores for gold, silver, zinc, copper, and lead deposits. The 100% owned Nuestra Senora Mine in the Cosala District of Sinaloa State, Mexico, has flexible mining methods and diversified metal production. It has a mechanized underground operation and a processing facility permitted for expansion to 4,000 tonnes per day. In Idaho, Co. operates the 100%-owned producing Galena Complex which was added following the business combination with U.S. Silver. The Galena Complex has recorded production of over 220 million ounces of silver.
Boyd Gaming is a multi-jurisdictional gaming company. The company operates owned gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. The company has three reportable business segments: Las Vegas Locals, which includes casinos that primarily serve the resident population of the Las Vegas metropolitan area; Downtown Las Vegas, focuses on gaming enthusiasts from Hawaii and tour and travel agents in Hawaii; and Midwest and South, which includes land-based casinos, dockside riverboat casinos, racinos and barge-based casinos. The company also operates a travel agency and a captive insurance company that underwrites travel-related insurance.
Frosta and its subsidiaries develop, produce and sell frozen food products in Germany and other European countries. The products are sold under Co.'s own brand labels and as private labels, FRoSTA, Elbtal, and TIKO. FRoSTA offers home delivery service for all of the products through the website www.frostashop.de. COPACK business segment comprises all activities connected with the private label in the food retail, home delivery, catering and industrial sectors. It covers Germany and Western Europe.
Hecla Mining and its subsidiaries discover, acquire and develop mines and other mineral interests and produce and market concentrates, carbon material and dore containing silver, gold, lead and zinc. The company has five units: the Greens Creek, Lucky Friday, Casa Berardi, San Sebastian and Nevada Operations units. The company produces zinc, lead and bulk flotation concentrates at its Greens Creek unit and lead and zinc flotation concentrates at its Lucky Friday unit, each of which the company sells to custom smelters and metal traders on contract. The company also produces unrefined gold and silver bullion bars (dore), loaded carbon and precipitates at its Casa Berardi, San Sebastian and Nevada Operations units.
Las Vegas Sands is a developer of destination properties (Integrated Resorts) that feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, restaurants and other amenities. The company owns and operates Integrated Resorts in Asia and the United States. Through its ownership of Sands China Ltd., the company owns and operates properties including The Venetian Macao Resort Hotel, Sands Cotai Central, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao. In Singapore, the company owns and operates the Marina Bay Sands. The company's Las Vegas Operating Properties includes The Venetian Resort Las Vegas and the Sands Expo Center.
MAG Silver is an exploration company conducting work on mineral properties it has staked or acquired by way of option agreement, principally in Mexico. Co. has not yet determined whether the properties on which it is conducting exploration contain any ore reserves that are economically recoverable. The recoverability of these amounts is dependent upon the existence of economically recoverable reserves, Co.'s ability to obtain the necessary financing to complete the development of the interests, and future profitable production, or alternatively, upon Co.’s ability to dispose of its interests on a profitable basis.
Pan American Silver is engaged in the production and sale of silver, gold and other base metals including copper, lead and zinc as well as other related activities, including exploration, extraction, processing, refining and reclamation. Co.'s primary product (silver) is produced in Peru, Mexico, Argentina and Bolivia. Additionally, Co. has project development activities in Peru, Mexico and Argentina, and exploration activities throughout South America and Mexico.
Platinum Group Metals is engaged in the acquisition, exploration and development of platinum properties. Co. holds interests in platinum properties in the Western and Northern Limbs of the Bushveld Complex in South Africa and in Canada. Co.'s business is conducted primarily in South Africa, and to a lesser extent, in Ontario, the Northwest Territories and Newfoundland and Labrador in Canada. Co. considers three of its mineral projects to be material: Project 1, the Waterberg JV Project and the Waterberg Extension Project. The majority of Co.'s exploration and development activities have been focused on Project 1 in order to advance it into development.
Silvercorp Metals is engaged in the operation and development of and in the acquisition and exploration for high-grade silver-related mineral properties in the People's Republic of China. The Ying Mining District consists of four mines (SGX, HPG, TLP, and LM) and is Co.'s primary source of production.
Summit Materials is a holding company. Through its subsidiaries, the company is a construction materials company. The company produces and sells aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. The company is engaged in paving and related services. The company has operations in various states across the United States and in British Columbia, Canada. The company operates a municipal waste landfill in its East segment, and has construction and demolition debris landfills and liquid asphalt terminal operations in its West and East segments.
United States Lime & Minerals through its Lime and Limestone Operations, is a manufacturer of lime and limestone products, supplying primarily the construction (highway, road and building contractors), industrial (paper and glass manufacturers), environmental (municipal sanitation and water treatment facilities and flue gas treatment processes), metals (steel producers), oil and gas services, roof shingle manufacturers and agriculture (poultry and cattle feed producers) industries. The company, through its wholly owned subsidiary has royalty interests and a non-operated working interest with respect to oil and gas rights on the company's land located in Johnson County, TX, in the Barnett Shale Formation.
Wheaton Precious Metals is engaged in the silver mining business.
Wynn Resorts is a holding company. Through its subsidiaries, the company is a designer, developer, and operator of resorts featuring hotel rooms, retail space, an array of dining and entertainment options, meeting and convention facilities, and gaming. Through its subsidiary, Wynn Macau, Limited, the company operates two integrated resorts in the Macau Special Administrative Region of the People's Republic of China, Wynn Palace and Wynn Macau. In Las Vegas, NV, the company also operates and, with the exception of certain retail space, own Wynn Las Vegas and Encore Boston Harbor, an integrated resort in Everett, MA, adjacent to Boston.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.