Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.42 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Another Bear Market Rally Begins

The bear market rally we have been discussing since our Sept. 27 Compass has begun, with over half of the Sectors and all the major indexes (S&P 500, Nasdaq 100, DJIA, and S&P 600 Small Caps) showing bullish 2+ month inflections. As referenced last week, we expect the aforementioned indexes to rally to their respective 200-day MAs; longer-term, this is still a bear market until they can break above their respective 200-day MAs.

Bullish 2+ Month Inflections. As mentioned above, the S&P 500, Nasdaq 100, DJIA, and S&P 600 Small Caps all display bullish 2+ month inflections. Sectors showing similar 2+ month bullish inflections include: Technology (XLK, RYT), Communications (XLC), Energy (XLE), Industrials (XLI), Consumer Staples (XLP), Health Care (XLV), and Transportation (XTN). The already broad-based participation suggests this rally has staying power, and we would expect to see the other Sectors follow. Of note, in last week's Compass (Oct. 18), we discussed that if the XLK can reclaim $123, it would be a short-term tailwind for the broad market. $123 was reclaimed last Friday, setting the stage for more upside... see chart below and pages 3-5.
Commodities, U.S. Dollar (DXY), 10-Yr Treasury Yield. We continue to monitor this trio for signs of tops; we believe at least two of these three need to start new downtrends in order for the broad equity market to establish a reliable bottom. The Bloomberg Commodity index (DJP) continues to consolidate within a descending triangle pattern, which is typically bearish, though a top can only be confirmed on a break below $32.50 on the DJP. The U.S. dollar (DXY) could be going through a consolidation phase, but the 10-year Treasury yield still shows virtually no signs of letting up. For this bear market rally to continue, we would expect to see consolidations in the DXY and 10-year yield, much like they did from mid-June to mid-August during the previous bear market rally... see page 6.
New Highs - New Lows. The new highs - new lows indicator displays the daily difference between the number of stocks reaching new 52-week highs and the number of stocks reaching new 52-week lows. This indicator bottomed in May on the Nasdaq Composite, and it bottomed in June on the Russell 3000; this is a sign of improving breadth, and a potential sign that market indexes have already bottomed... see page 7.
Underlyings
AECOM

AECOM designs, builds, finances and operates infrastructure assets for governments, businesses and organizations. The company provides: planning, consulting, architectural and engineering design services to commercial and government clients in transportation, facilities, environmental, energy, water and government markets; construction services, including building construction and energy, infrastructure and industrial construction; as well as program and facilities management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, for agencies of the United States government and for other national governments.

Baker Hughes Company Class A

Baker Hughes is an energy technology company. The company's segments are: Oilfield Services, which provides products and services for onshore and offshore operations ranging from drilling, evaluation, completion, production, and intervention; Oilfield Equipment, which provides products and services for the subsea, offshore surface and onshore operating environments; Turbomachinery and Processing Solutions, which provides equipment and related services for mechanical-drive, compression and power-generation applications; and Digital Solutions, which includes condition monitoring, industrial controls, non-destructive technologies, measurement, sensing, and pipeline solutions.

BWX Technologies Inc.

BWX Technologies is a manufacturer of nuclear components, a developer of nuclear technologies and a service provider. The company operates three segments: Nuclear Operations Group, which engineers, designs and manufactures precision naval nuclear components, reactors and nuclear fuel for the U.S. Department of Energy/National Nuclear Security Administration's Naval Nuclear Propulsion Program; Nuclear Services Group, which provides services including nuclear materials processing and management and operating services; and Nuclear Power Group, which designs and manufactures commercial nuclear steam generators, heat exchangers, pressure vessels, reactor components and other auxiliary equipment.

Cactus Inc

Cactus is a holding company. Through its subsidiaries, the company is primarily engaged in the design, manufacture and sale of wellhead and pressure control equipment. In addition, the company maintains a fleet of frac valves and ancillary equipment for short-term rental. The company's products are sold and rented principally for onshore unconventional oil and gas wells and are utilized during the drilling, completion and production phases of its customers' wells. The company also provides field services for all of its products and rental items to assist with the installation, maintenance and handling of the wellhead and pressure control equipment as well as provides repair and refurbishment services.

ChampionX Corporation

Chart Industries Inc.

Chart Industries is a manufacturer of equipment servicing multiple market applications in energy and industrial gas. The company's product portfolio is used throughout the liquid gas supply chain in the production, storage, distribution and end-use of atmospheric, hydrocarbon, and industrial gases. The company's equipment and systems are primarily used to cool gases often to cryogenic liquid temperatures and then to transport and store them as liquids. The company's products include vacuum insulated containment vessels, heat exchangers, cold boxes, liquefaction process units, other cryogenic components, gas processing equipment, ambient temperature fans and after market services.

DHT Holdings Inc.

Dycom Industries Inc.

Dycom Industries is a provider of specialty contracting services. The company supplies telecommunications providers with a portfolio of specialty services, including program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services for telecommunications providers. Additionally, the company provides underground facility locating services for various utilities, including telecommunications providers, and other construction and maintenance services for electric and gas utilities. The company supplies the labor, tools, and equipment necessary to provide these services to its customers.

EMCOR GROUP

EMCOR Group is an electrical and mechanical construction and facilities services firm. In addition, the company provides building services and industrial services. The company's services are provided to its customers through its operating subsidiaries and joint venture entities. The company engages in providing construction services relating to electrical and mechanical systems in various types of facilities and in providing various services relating to the operation, maintenance and management of facilities. The company also provides its construction services indirectly by acting as a subcontractor to general contractors, systems suppliers, construction managers, developers, property managers and other subcontractors.

Euronav NV

Euronav is a provider of maritime shipping and offshore services engaged primarily in the transportation and storage of crude oil. As of Apr. 4, 2017, Co. owned and operated a modern fleet of 55 vessels (including four chartered-in vessels) with an aggregate carrying capacity of approximately 13.7 million deadweight tons, or dwt, consisting of 31 very large crude carriers, one ultra large crude carrier, 21 Suezmax vessels, and two floating, storage and offloading vessels. Co. has two operating segments: the operation of crude oil tankers on the international markets (tankers) and the floating production, storage and offloading operations.

Fluor Corporation

Fluor is a holding company. Through its subsidiaries, the company provides engineering, procurement, construction, fabrication and modularization, operations, maintenance and asset integrity, as well as project management services. The company serves a set of industries including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and manufacturing. The company is also a service provider to the U.S. federal government and governments abroad; and it performs operations, maintenance and asset integrity activities for industrial clients. The company has four segments: Energy & Chemicals; Mining, Industrial, Infrastructure & Power; Diversified Services; and Government.

Frank's International NV

Frontline Ltd.

GasLog Partners LP

Golar LNG Limited

Golar LNG is a midstream liquefied natural gas (LNG) company based in Bermuda. Co. is engaged in the transportation, regasification, liquefaction and trading of LNG. Through its subsidiaries and affiliates, Co. is engaged in the acquisition, ownership, operation and chartering of LNG carriers and floating storage regasification units (FSRUs), and the development of liquefaction projects such as Floating Liquefaction Natural Gas Vessels. Co. owns and operates a fleet of 19 LNG carriers and seven FSRUs, and under management agreements operates Golar LNG Partner LP's fleet of six FSRUs and four LNG carriers.

Halliburton Company

Halliburton assists its customers throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion and optimizing production throughout the life of the asset. The company's segments are: Completion and Production, which delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion products and services; and Drilling and Evaluation, which provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities.

International Seaways Inc.

NexTier Oilfield Solutions Inc.

NexTier Oilfield Solutions is a holding company. Through its subsidiaries, the company is engaged as a land oilfield focused service company, with a set of well completion and production services across active basins. The company provides its services through its operating subsidiaries to exploration and production customers. Also, the company provides its services in several active basins in the United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford and the Bakken/Rockies. The company is organized into two segments: Completion Services, which includes Hydraulic Fracturing and Wireline Technologies; and Well Construction and Intervention Services, which includes Cementing and Coiled Tubing.

NOV Inc.

ProPetro Holding Corp.

ProPetro Holding is a holding company. Through its subsidiary, the company is engaged as an oilfield services company providing hydraulic fracturing and other services to upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. The company's operations are primarily focused in the Permian Basin. In addition to its core hydraulic fracturing operations, the company provides complementary well completion and production services, including cementing, coiled tubing, flowback services and drilling. The company conducts its business through five segments: hydraulic fracturing (inclusive of acidizing), cementing, coil tubing, flowback and drilling.

Quanta Services Inc.

Quanta Services is a provider of contracting services, delivering infrastructure solutions for the electric power, energy and communications industries in the United States, Canada, Australia, Latin America and select other international markets. The company has two segments: Electric Power Infrastructure Services, which provides network solutions to customers in the electric power industry and services that support the development of renewable energy generation; and Pipeline and Industrial Infrastructure Services, which provides infrastructure solutions to customers involved in the development, transportation, distribution, storage and processing of natural gas, oil and other products.

Rare Element Resources

Schlumberger NV

Schlumberger provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The company has four segments: Reservoir Characterization, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells; Production, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs; and Cameron, which consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.

Select Energy Services Inc. Class A

Select Energy Services is a provider of water-management solutions. The company's segments are: Water Services, which provides the services to support new oil and gas well completions as well as ongoing production over the life of the well, including water transfer, flowback and well testing; Water Infrastructure, which develops, builds and operates infrastructure solutions to support both new oil and gas well development; and Oilfield Chemicals, which develops, manufactures and provides a suite of completion and production chemical products, water treatment solutions and services utilized in hydraulic fracturing, stimulation, cementing and related well completion and production processes.

Solaris Oilfield Infrastructure

Solaris Oilfield Infrastructure is a holding company. Through its subsidiaries, the company is a provider of supply chain management and logistics solutions for the oil and natural gas industry. The company's offerings include: system rental, which manufactures and rents equipment to manage the delivery, handling and storage of proppant and chemicals at the well site; field services, which provides trained personnel to maintain and support its systems, train its customers to operate the systems and assist in the transportation of its systems; and transloading services, which provides manifest and unit-train transloading services, as well as provides forward staging storage of regional and local proppant.

Teekay Corporation

Teekay Tankers

TETRA Technologies Inc.

TETRA Technologies is an oil and gas services company, focused on completion fluids and associated products and services, water management, frac flowback, production well testing and offshore rig cooling services, and compression services and equipment. The company has three divisions: Completion Fluids & Products, which manufactures and markets clear brine fluids, additives, and associated products and services as well as markets liquid and dry calcium chloride products; Water and Flowback Services, which provides water management services; Compression, which provides compression services and equipment for natural gas and oil production, gathering, transportation, processing, and storage.

Weatherford International Plc

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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