Report
Dave Nicoski ...
  • Ross LaDuke
EUR 235.55 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Markets at key inflection point

Global markets are at a key inflection point as investors await the first Fed rate cut since 2008 in an effort to keep the economy on track and stave off uncertainties relating to global growth and trade. Over the past couple of weeks the market has been in wait-and-see mode in anticipation of this Wednesday's Fed announcement. Earnings have been the focal point, but the S&P 500 has been virtually unchanged. That is all likely to change following the Fed rate cut announcement and Powell's press conference. Below we highlight several areas that are at key inflection points - including the ACWI chart below - whose ultimate resolutions are likely to determine where equities are headed next.

• Bond-proxy Sectors testing YTD RS lows. RS is testing horizontal support at YTD lows for defensive bond-proxy Sectors Utilities (XLU) and Real Estate (VNQ). Breakdowns below RS support would be encouraging as it would be characteristic of an equity bull market -- price uptrends and RS downtrends for defensive Sectors... see page 2.

• Cyclicals testing resistance. Several cyclical areas of the market including industrials (XLI), banks (KBE, KRE), semiconductors (SOXX), and the cyclical vs. staple ratio (XLY/XLP) are testing important resistance levels. Breakouts would lead us to believe the bull market is here to stay... see pages 3-4.

• US dollar (DXY), euro. The DXY is testing YTD highs while the euro tests YTD lows. We highlight some key levels we are watching and continue to believe a gradual weakening of the DXY would likely create a best-case scenario for global equities... see page 5.

• Sector Relative Strength Rankings & Weighting Recommendations. One troubled area of the market that appears to be bottoming is the Health Care Providers/Services (IHF) space. We highlight UNH which offers a timely buy opportunity... see pages 6-7.

In today's report we highlight attractive Groups and stocks within Consumer Discretionary, Consumer Staples, and Manufacturing: CD-18 Education Services, Large-Cap, CS-24 Soaps & Cleaning Supplies, and MF-09 Aerospace, Controls/Simulations... see pages 14-22.
Underlyings
Adtalem Global Education Inc.

Adtalem Global Education provides educational services. The company's institutions and companies provide an array of programs across medical and healthcare, financial services and business and law. The company's segments include: Medical and Healthcare, which includes Chamberlain University and Medical and Veterinary Schools that provide educational programs in nursing and health professions, respectively; Financial Services, which includes Becker Professional Education that provides education serving the accounting and finance professions; and Business and Law, which includes Adtalem Education of Brazil institution that focuses in business, engineering, healthcare, law, management, medical and technology.

Bright Horizons Family Solutions Inc.

Bright Horizons Family Solutions is a provider of child care and early education, back-up care and educational advisory services. The company provides services under contracts with employers, who provide child care, as well as other dependent care solutions and educational advisory services. The company's service offerings include full-service center-based child care and early education, back-up care, and educational advisory services. The company operates child care and early education centers across a range of customer industries with the capacity to serve children and their families in the U.S., as well as in the U.K., the Netherlands, Canada and India.

CAE Inc.

CAE designs, manufactures and supplies simulation equipment, provide training, and develops integrated training solutions for defence and security markets, commercial airlines, business aircraft operators, helicopter operators, aircraft manufacturers and for healthcare education and service providers. Co.'s flight simulators replicate aircraft performance in normal and abnormal operations as well as a set of environmental conditions utilizing visual systems that contain a database of airports, other landing areas, flying environments, mission-specific environments, and motion and sound cues. Co. provides a range of flight training devices based on the same software used on its simulators.

Church & Dwight Co. Inc.

Church & Dwight develops, manufactures and markets a range of consumer products. The company's consumer products include: ARM & HAMMER? baking soda, cat litter, laundry detergent, carpet deodorizer and other baking soda based products; TROJAN? condoms, lubricants and vibrators; OXICLEAN? stain removers, cleaning solutions, laundry detergents and bleach alternatives; SPINBRUSH? battery-operated toothbrushes; FIRST RESPONSE? home pregnancy and ovulation test kits; NAIR? depilatories; ORAJEL? oral analgesic; XTRA? laundry detergent; L'IL CRITTERS? and VITAFUSION? gummy dietary supplements; BATISTE? dry shampoo; WATERPIK? water flossers and showerheads, and FLAWLESS? hair removal products.

Clorox Company

Clorox is a manufacturer and marketer of consumer products. The company sells its products through mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, drug, pet and military stores, third-party and owned e-commerce channels, and distributors. The company has four reportable segments: Cleaning, which consists of laundry, home care and other products; Household, which consists of charcoal, bags, wraps and containers, cat litter, and digestive health products; Lifestyle, which consists of food products, water-filtration systems and filters, natural personal care products, and dietary supplements; and International, which consists of products sold outside the United States.

Colgate-Palmolive Company

Colgate-Palmolive manufactures and markets a variety of products in the United States and around the world. The company has two product segments: Oral, Personal and Home Care; and Pet Nutrition. Oral, Personal and Home Care products include toothpaste, toothbrushes and mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants, skin care products, dishwashing detergents, fabric conditioners, household cleaners, and other similar items. Pet Nutrition products include specialty pet nutrition products manufactured and marketed by Hill's Pet Nutrition.

Dixie Group

Dixie Group markets, manufactures and sells finished carpet, rugs and vinyl tile in the domestic floorcovering market. The company's brands include: Fabrica, which markets and manufactures residential carpet and custom rugs; Masland Residential, which markets and manufactures design-driven carpets and rugs for the residential marketplace; Dixie Home, which markets an array of residential tufted broadloom and rugs to selected retailers and home centers under the Dixie Home and private label brands; and Atlas Masland Contract, which markets to the architectural and specified design community and directly to commercial end users, as well as to consumers through floorcovering retailers.

Grand Canyon Education Inc.

Grand Canyon Education is an educational services company focused on providing support services to institutions in the post-secondary education sector. The company's services include: Technical and Academic Services, which provides services that relate to the ongoing maintenance of its client's educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems; Counseling Services and Support, which includes team-based counseling and other support for prospective and existing students of its client as well as financial aid processing; Marketing and Communication; and Back Office Services.

iShares PHLX Semiconductor ETF

iShares U.S. Healthcare Provid

Kratos Defense & Security Solutions Inc.

Kratos Defense & Security Solutions is a technology, intellectual property, proprietary product and system company focused on the U.S. and its allies' national security. The company operates in three segments. The Kratos Government Solutions segment is comprised of an aggregation of operating segments, including the company's microwave electronic products, space and satellite communications, modular systems and rocket support operating segments. The Unmanned Systems segment consists of the company's unmanned aerial system and unmanned ground and seaborne system businesses. The Public Safety and Security segment provides independent integrated solutions for government and commercial applications.

New Oriental Education & Technology Group Inc. Sponsored ADR

Procter & Gamble Company

Procter & Gamble provides consumer packaged goods. The company's products are sold primarily through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, beauty stores, other stores and pharmacies. The company has five reportable segments: Beauty, which includes hair care, and skin and personal care products; Grooming, which includes shave care products; Health Care, which includes oral care and personal health care products; Fabric and Home Care, which includes fabric care and home care products; and Baby, Feminine and Family Care, which includes baby care, feminine care and family care products.

Select Sector SPDR-Consumer Discretionary

Select Sector SPDR-Consumer Staples

Select Sector SPDR-Industrial

Select Sector SPDR-Utilities

SPDR KBW Bank ETF

Unilever NV ADR

UnitedHealth Group Incorporated

UnitedHealth Group is a health care company. The company has four reportable segments across its two business platforms, UnitedHealthcare and Optum: UnitedHealthcare, which provides health care benefits to an array of customers and markets through its UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global; OptumHealth, which serves the physical, emotional and health-related financial needs of individuals; OptumInsight, which provides services, technology and health care knowledge to main participants in the health care industry; and OptumRx, which provides pharmacy care services and programs.

Vanguard REIT ETF

WD-40 Company

WD-40 is engaged in developing and selling products that solve problems in workshops, factories and homes. The company markets its maintenance products and its homecare and cleaning products under the following brands: WD-40?, 3-IN-ONE?, GT85?, X-14?, 2000 Flushes?, Carpet Fresh?, no vac?, Spot Shot?, 1001?, Lava? and Solvol?. The WD-40 brand includes the WD-40 Multi-Use Product and the WD-40 Specialist? and WD-40 BIKE? product lines. The company's brands are sold in various locations. Maintenance products are sold in markets in North, Central and South America, Asia, Australia, Europe, the Middle East and Africa. Homecare and cleaning products are sold in North America, the United Kingdom and Australia.

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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