Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.92 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Conditions Improving; Watching Cyclicals, 10-Yr Yield

Market conditions have started to improve, and the bottom line is that all Sectors and major indexes remain above critical supports. The absence of breakdowns continues to support our overall constructive outlook, and we are watching the 10-year Treasury yield, small-caps (IWM), Financials (XLF), and Industrials (XLI) closely for signs that a new broad-based rally is upon us.

Conditions Improving. The 10-year Treasury yield displays early signs of bottoming above 1.13% support, WTI and Brent crude oil are back above the critical $66 and $70 levels (respectively), US high yield spreads are leveling-out, small-caps (IWM) display a short-term bullish inflection, RS for Consumer Staples (XLP) just touched new YTD lows, and emerging markets (EEM) are attempting to reverse higher. This is exactly what equity market bulls want to see; as long as it continues, it means these dynamics are shifting from concerns to tailwinds for the broad equity market... see pages 3-4.
Watching Cyclicals, 10-Year Treasury Yield. Financials (XLF) are flirting with a breakout above $38.60 (1H2021 highs), though has not been able to sustain a breakout. We are also watching for Industrials (XLI), Materials (XLB), small-caps (IWM) and micro-caps (IWC) to break above their respective 1H2021 highs. In order for that to happen, we would likely need the 10-year Treasury yield to move back above the 1.38-1.45% resistance area. Breakouts to new highs would signal the end of the "mixed environment" we have referenced for months, and the start of a broad-based advance... see pages 5-6.
S&P 500. The S&P 500 remains bullish and yesterday it hit our 4535 initial target. This is short-term resistance and we expect to see some near-term consolidation. Still, as long as key support at the 50-day MA (4385) holds, our next target is 4700. Should the 50-day MA break, it would likely kickstart a 5-15% pullback, and our next support levels to watch would be 4368, 4300, 4257, 4233, and 4164... see chart below.
Underlyings
Advanced Micro Devices Inc.

Advanced Micro Devices is a semiconductor company. The company primarily provides x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit, chipsets, graphics processing units (GPUs), data center and personnel GPUs, and development services; server and embedded processors, semi-custom System-on-Chip products, development services and technology for game consoles. The company also licenses portions of its intellectual property portfolio. The company's segments are: Computing and Graphics, which consists of desktop, notebooks, commercial, and chipsets products; and Enterprise, Embedded and Semi-Custom, which includes server processors, and embedded P\processors products.

Agilent Technologies Inc.

Agilent Technologies is engaged in life sciences, diagnostics and applied chemical markets. The company's segments are: Life Sciences and Applied Markets Business, which provides instruments and software that enable customers to identify, quantify and analyze the physical and biological properties of substances and products; Diagnostics and Genomics Business, which includes the genomics, nucleic acid contract manufacturing and research and development, pathology, companion diagnostics, reagent partnership and biomolecular analysis businesses; and Agilent CrossLab Business, which spans the entire lab with its consumables and services portfolio to improve customer outcomes.

Alliance Resource Partners L.P.

Alliance Resource Partners is a natural resource company. The company is a coal producer in the eastern United States. The company markets its coal production to main domestic and international utilities and industrial users. The company has two reportable segments: Illinois Basin, which comprises of multiple operating segments, including operating mining complexes Webster County Coal's Dotiki mining complex, Gibson County Coal's mining complex, River View's mining complex and the Hamilton mining complex; and Appalachia, which comprises of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex, the MC Mining mining complex and the Penn Ridge property.

Arch Resources Inc. Class A

Arch Coal is a coal producer. The company's main business is the production of thermal and metallurgical coal from surface and underground mines located throughout the United Staets, for sale to utility, industrial and steel producers both in the United States and around the world. The company's segments are based on two lines of business, metallurgical coal and thermal coal, and may include a number of mine complexes. The company's segments are: the Powder River Basin, containing primary thermal operations in Wyoming; the Metallurgical, containing metallurgical operations in West Virginia; and the Other Thermal, containing supplementary thermal operations in Colorado and Illinois.

Boyd Gaming Corporation

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.

Caesars Entertainment Inc

Century Casinos Inc.

Century Casinos is an international casino entertainment company that develops and operates gaming establishments as well as related lodging, restaurant, horse racing and entertainment facilities. The company owns casino operations in North America and England; develops a racetrack and entertainment center (REC) in Edmonton, Canada; holds interest in casino licenses throughout Poland; holds interest in a REC in Calgary, Canada, and the pari-mutuel off-track betting network in southern Alberta, Canada; manages cruise ship-based casinos on international waters; manages a hotel, entertainment and gaming club in Vietnam through a majority-owned subsidiary, and provides gaming services in Argentina.

Churchill Downs Incorporated

Churchill Downs is a racing, online wagering and gaming entertainment company. The company manages its operations through three reportable segments: Churchill Downs, Online Wagering, and Gaming. Churchill Downs includes live and historical pari-mutuel racing at Churchill Downs Racetrack and Derby City Gaming. Online Wagering includes the company's TwinSpires business and its online sports betting and iGaming business. Gaming includes casino properties and associated racetrack or jai alai facilities which support the casino license as applicable.

Cohu Inc.

Cohu provides semiconductor test equipment and services. The company's products include semiconductor test, which is used for wafer level and device package testing; semiconductor handlers, which are used to automate the testing and inspection of packaged semiconductor devices; thermal sub-systems, which provide temperature control of the integrated circuit during the testing process; bare board printed circuit board (PCB) test systems, which are used to test pre-assembly PCBs; interface products, which consist of test contactors and probe pins; spares and kits, which provide consumable, non-consumable and spare items; and services, which performs installations and maintenance of systems sold.

Golden Entertainment

Golden Entertainment owns and operates an entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations and distributed gaming (including gaming in its branded taverns). The company conducts its business through two reportable operating segments: Casinos, which owns and operates resort casino properties, comprising of The Strat; Arizona Charlie's casinos; Laughlin casinos; Pahrump casinos; and Rocky Gap. Distributed Gaming, which involves the installation, maintenance and operation of slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana.

Keysight Technologies Inc

Keysight Technologies is a technology company. The company's segments are: Communications Solutions Group, which provides electronic design and test software, instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment; Electronic Industrial Solutions Group, which provides test and measurement solutions and related services across a set of electronic industrial end markets; and Ixia Solutions Group, which helps customers design, validate and support the performance and security of their networks and associated components and applications.

Marvell Technology Group Ltd.

Marvell Technology Group is a semiconductor provider of application-specific products. The company is focused on the development of System-on-a-Chip devices, utilizing its technology portfolio of intellectual property in the areas of analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. The company develops integrated hardware platforms along with software that incorporates digital computing technologies. In storage, the company is engaged in fibre channel products and data storage controller solutions spanning cloud, enterprise, edge and personal computing markets. The company's networking products include ethernet solutions, embedded processors and WiFi connectivity solutions.

Mettler-Toledo International Inc.

Mettler-Toledo International is a supplier of precision instruments and services. The company manufactures weighing instruments for use in laboratory, industrial, packaging, logistics, and food retailing applications. The company also manufactures several related analytical instruments and provides automated chemistry solutions used in drug and chemical compound discovery and development. In addition, the company manufactures metal detection and other end-of-line inspection systems used in production and packaging and provides solutions for use in certain process analytics applications. The company has five segments: United States Operations, Swiss Operations, Western European Operations, Chinese Operations, and Other.

Microchip Technology Incorporated

Microchip Technology develops, manufactures and sells semiconductor products. The company's product portfolio comprises general purpose and other eight-bit, 16-bit, 32-bit microcontrollers, 32-bit microprocessors, field-programmable gate array products, a range of linear, mixed-signal, power management, thermal management, discrete diodes, Metal Oxide Semiconductor Field Effect Transistors, radio frequency, timing, timing systems, safety, security, wired connectivity and wireless connectivity devices, serial Electrically Erasable Programmable Read Only Memory, Serial Flash memories, Parallel Flash memories, Serial Electrically Erasable Random Access Memory and serial Static Random Access Memory.

Monolithic Power Systems Inc.

Monolithic Power Systems is a fabless semiconductor company. The company designs, develops and markets power solutions for systems found in consumer, computing and storage, automotive, industrial, communications and consumer applications. The company's primary product families include the following: Direct Current (DC) to DC products, which are used to convert and control voltages within a range of electronic systems such as portable electronic devices, wireless Local Area Network access points, computers, and monitors, automobiles and medical equipment; and Lighting Control Products, which include lighting control integrated circuits that are used in backlighting and general illumination products.

ON Semiconductor Corporation

ON Semiconductor is engaged in energy efficient electronics. The company is organized into three segments: Power Solutions Group, which provides a range of discrete, module and integrated semiconductor products; Analog Solutions Group, which designs and develops analog, mixed-signal, and advanced logic application specific integrated circuits and Application Specific Standard Product, and power solutions; and Image Sensor Group, which designs and develops complementary metal oxide semiconductor and charge-coupled device image sensors, as well as proximity sensors, image signal processors and actuator drivers for autofocus and image stabilization for automotive and industrial markets, among others.

Peabody Energy Corporation

Peabody Energy is a coal company, engaged in the mining of thermal coal for sale primarily to electric utilities and metallurgical coal for sale to industrial customers. The company owns interests in several coal mining operations located in the U.S. and Australia. The company has a majority interest in several of those mining operations and an equity interest in Middlemount Coal Pty Ltd. (Middlemount), which owns the Middlemount Mine in Queensland, Australia. In addition to its mining operations, the company markets and brokers coal from other coal producers, both as principal and agent, and trade coal and freight-related contracts through trading and business offices in the U.S., Australia, China, and the U.K.

Penn National Gaming Inc.

Penn National Gaming is an owner and manager of gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. In addition, the company operates an interactive gaming division through its subsidiary, Penn Interactive Ventures, LLC. The company's segment's properties include Ameristar East Chicago, Hollywood Casino Bangor, 1st Jackpot Casino, Ameristar Vicksburg, Boomtown Biloxi, Boomtown Bossier City, Ameristar Black Hawk, Cactus Petes and Horseshu, Ameristar Council Bluffs, Argosy Casino Alton, Argosy Casino Riverside, Freehold Raceway, Retama Park Racetrack, Sam Houston Race Park and Valley Race Park, and Sanford-Orlando Kennel Club, among others.

Red Rock Resorts Inc. Class A

Red Rock Resorts is a holding company that manages and owns an indirect equity interest in Station Casinos LLC (Station LLC), through which it conducts all of its operations. Station LLC is a gaming, development and management company that develops and operates casino and entertainment properties. Station LLC owns and operates gaming and entertainment facilities and casinos, providing slot machines, table games and hotel rooms in the Las Vegas regional market. Station LLC also manages Graton Resort & Casino in Sonoma County, California on behalf of a Native American tribe. The company holds an indirect equity interest in Station LLC through its ownership interest in Station Holdco LLC.

Stabilus SA

Stabilus SA, formerly Servus HoldCo SARL is a Luxembourg-based company. The Company is the automotive and industrial supplier. It develops and produces electromechanical drives, gas springs and dampers. Its products in the automotive segment are used in a broad range of applications such as tailgates, hoods, doors and convertible tops. In addition, Stabilus SA supplies industrial customers, for example in medical and rehab technology (operating tables, hospital beds, wheelchairs), transportation and traffic (flaps and lids for luggage, loading and maintenance), furniture (cabinet lids, beds, tables) and house and building technology (skylights, smoke exhaust vents, awnings).

United Microelectronics Corp (ADR)

Warrior Met Coal Inc.

Warrior Met Coal is a holding company. Through its subsidiaries, the company is a producer and exporter of met coal. The company sells its coal product to steel producers in Europe and South America. The company's mining operations consist of two underground met coal mines in Southern Appalachia's coal seam (Mines No. 7 and No. 4) and other surface met and thermal coal mines. The company's natural gas operations remove and sell natural gas from the coal seams owned or leased by the company and others as a byproduct of coal production. The company's degasification operations improve mining operations and safety by reducing natural gas levels in its mines. The company also owns mineral rights for recoverable reserves at its Blue Creek Energy Mine.

Xilinx Inc.

Xilinx designs and develops programmable devices and associated technologies, including: integrated circuits (ICs) in the form of programmable logic devices (PLDs), including programmable System on Chips and three-dimensional ICs; Adaptive Compute Acceleration Platform, a multi-core heterogeneous compute platform; software design tools to program the PLDs; software development environments and embedded platforms; targeted reference designs; printed circuit boards; and intellectual property (IP), which consists of the company and third-party verification and IP cores. In addition to its programmable platforms, the company provides design services, customer training, field engineering and technical support.

Yanzhou Coal Mining Co. Ltd. ADS

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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