Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.72 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Downgrading Technology To Underweight

Our outlook remains bearish at the index level considering we have yet to see any developments that suggest a bottom is in, and the S&P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), and Russell Micro Cap (IWC) indexes remain in downtrends.

Sector Relative Strength Rankings. We are downgrading Technology to underweight; RS is trading within multi-month downtrends and is breaking below major support on the cap- and equal-weighted Sectors (XLK, RYT) -- reduce exposure. Additionally, semiconductors (SOXX) display price and RS breakdowns while software (IGV) is breaking to new price and RS lows. Even Apple (AAPL), one of the last generals standing, is now breaking $152 support... see charts below and page 2.
Evidence Suggests More Downside Ahead. In addition to intact downtrends on the S&P 500, Nasdaq 100, Russell 2000, and Russell Micro Caps, several other metrics suggest the broad market has not yet bottomed. (1) We have yet to see a washout in the form of 90%+ downside volume on the NYSE. (2) Defensive areas including Consumer Staples (XLP), Utilities (XLU), and Health Care/pharma (XLV, PPH) remain in short-term RS uptrends. (3) US high yield spreads (vs. the 10-year Treasury yield) remain in a 2-month uptrend. (4) The cap- and equal-weighted Discretionary vs. Staples ratios (XLY vs. XLP and RCD vs. RHS) remain in 3.5-4-month downtrends... see page 4.
Treasury Yields; Fed Raising Rates on Wednesday; Remain Overweight Value. The 10-year Treasury yield held above 1-65%-1.70% support and has climbed to new YTD highs; the fact that yields are not breaking down is one of the few positive signals out there for the broad equity market. With inflation running hot the Fed has no choice but to raise rates by 25 bps on Wednesday. With the Fed planning to raise rates anywhere from three to six times in 2022, we continue to overweight value relative to growth... see page 5.
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.

American Vanguard

American Vanguard is a holding company. Through its subsidiary, AMVAC Chemical Corporation (AMVAC), the company is primarily a specialty chemical manufacturer that develops and markets products for agricultural, commercial and consumer uses. The company manufactures and formulates chemicals for crops, turf and ornamental plants, and human and animal health protection. These chemicals, which include insecticides, fungicides, herbicides, molluscicides, growth regulators, and soil fumigants, are marketed in liquid, powder, and granular forms. AMVAC primarily synthesizes, formulates, and distributes its own proprietary products or custom manufactures or formulates for others.

Arcadian Partners LP

BETASHARES CRUDE OIL INDEX ETF - CURRENCY HEDGED SYNTHETIC

CF Industries Holdings Inc.

CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.

Consolidated Edison Inc.

Consolidated Edison is a holding company. Through its subsidiaries, the company is engaged in provision of energy services. The company's subsidiaries include: Consolidated Edison Company of New York, Inc.'s principal business operations are its regulated electric, gas and steam delivery businesses; Orange & Rockland Utilities, Inc.'s principal business operations are its regulated electric and gas delivery businesses; Con Edison Clean Energy Businesses, Inc. develops, owns and operates renewable and energy infrastructure projects and provides energy-related products and services to wholesale and retail customers; and Con Edison Transmission, Inc. invests in electric and gas transmission projects.

Dominion Energy Inc

Dominion Energy is a holding company. Through its subsidiaries , the company is engaged in producing and transporting energy. The company's operations are conducted through its subsidiaries: Virginia Electric and Power Company, which is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and North Carolina; and Dominion Energy Gas Holdings, LLC, which serves as the intermediate parent company for the company's Federal Energy Regulatory Commission-regulated interstate natural gas transmission pipeline and underground storage systems in the eastern and Rocky Mountain regions, as well as for the liquefied natural gas import/export and storage facility.

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.

FirstEnergy Corp.

FirstEnergy is a public utility holding company. The company and its subsidiaries are principally involved in the transmission, distribution and generation of electricity. The company's reportable operating segments are comprised of: Regulated Distribution, which distributes electricity through the company's utility operating companies and also controls regulated electric generation capacity located primarily in West Virginia, Virginia and New Jersey; and Regulated Transmission, which provides transmission infrastructure owned and operated by the transmission companies and certain of the company's utilities to transmit electricity from generation sources to distribution facilities.

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.

GATX Corporation

GATX is a global railcar lessor. The Rail North America segment provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and property insurance, and provides other ancillary services. The Rail International segment leases railcars pursuant to full-service leases under which it maintains the railcars and provides services according to customer requirements. The Portfolio Management segment leases aircraft spare engines, as well as five liquefied gas-carrying vessels. The American Steamship Company segment provides waterborne transportation of dry bulk commodities such as iron ore, coal, limestone aggregates, and metallurgical limestone.

Genie Energy Ltd. Cl B

Genie Energy through its subsidiary, Genie Energy International Corporation (GEIC), which owns Genie Retail Energy (GRE), owns and operates retail energy providers (REP). Its REP businesses resell electricity and natural gas to residential and business customers primarily in the Eastern U.S. Internationally, GRE manages the company's interest in a joint venture that serves retail customers in the U.K. The company has three reportable business segments: GRE, which is comprised of REP and related businesses; Genie Energy Services, which is comprised of businesses that market and provide energy solutions; and Genie Oil and Gas, Inc., which owns an interest in a contracted drilling services operation.

Greenbrier Companies Inc.

Greenbrier Companies is a holding company. Through its subsidiaries, the company designs, manufactures and markets railroad freight car equipment in North America, Europe, the Gulf Cooperation Council and South America. The company has three segments: Manufacturing, which produces conventional railcars, tank cars, intermodal railcars, automotive and is involved in marine vessel fabrication; Wheels, Repair and Parts, which includes reconditioning of wheels and axles in addition to new axle machining and finishing and downsizing; and Leasing and Services, which includes railcar maintenance management, railcar accounting services, total fleet management, administration and railcar remarketing.

ICL Group Ltd.

Israel Chemicals, through its subsidiaries, extracts raw materials and utilizes processing and product formulation technologies to add value to customers in the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics, medicines and vehicles. Co. operates two segments: Essential Minerals and Specialty Solutions. The Essential Minerals segment includes the ICL Potash & Magnesium, ICL Phosphate and ICL Specialty Fertilizers business lines. The Specialty Solutions segment includes four business lines: ICL Industrial Products; ICL Specialty Fertilizers; ICL Advanced Additives and ICL Food Specialties.

Intrepid Potash

Invesco S&P 500 Equal Weight Technology ETF

iShares Micro-Cap ETF

Mosaic Company

Mosaic is a producer and marketer of concentrated phosphate and potash crop nutrients. The company is organized into three reportable business segments: Phosphates, which owns and operates mines and production facilities in Florida that produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and processing plants in Louisiana that produce concentrated phosphate crop nutrients; Potash, which mines and processes potash in Canada and the United States and sells potash in North America and internationally; and Mosaic Fertilizantes, which produces and sells concentrated phosphates crop nutrients, phosphate-based animal feed ingredients and potash fertilizer.

NiSource Inc

NiSource is an energy holding company. Through its subsidiaries, the company is a natural gas distribution company. The company's reportable segments are: Gas Distribution Operations and Electric Operations. For its gas distribution operations, through its wholly-owned subsidiary, NiSource Gas Distribution Group, Inc., the company owns distribution subsidiaries that provide natural gas to residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Massachusetts. Through its electric operations, the company generates, transmits and distributes electricity through its subsidiary, Northern Indiana Public Service Company LLC, and engages in wholesale and transmission transactions.

Public Service Enterprise Group Inc

Public Service Enterprise Group, through its subsidiaries, is engaged in the energy industry. The company conducts its business through two subsidiaries, Public Service Electric and Gas Company (PSE&G) and PSEG Power LLC (PSEG Power). PSE&G is a public utility, which is engaged in the transmission of electricity and distribution of electricity and natural gas in certain areas of New Jersey; and PSEG Power is a multi-regional energy supply company that integrates the operations of its merchant nuclear and fossil generating assets with its power marketing businesses and fuel supply functions through energy sales in energy markets primarily in the Northeast and Mid-Atlantic United States.

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.

Select Sector SPDR-Technology

Somec

Somec SpA is an Italy-based holding company, which designs and manufactures glass envelopes for cruise ships and special architectural projects. The Company provides products, systems and services based on clients' needs. It supplies prefabricated balconies, balcony sliding and hinged doors, balcony automatic doors, balcony balustrades and partitions, as well as wheelhouse windows, glass walls for public spaces, windscreens, special glazing for solarium, skywalks and skylights, fire-rated doors and glazing. Through its subsidiaries, the Company operates in the shipyards, in dry-docks and navigation to guarantee the product installation, renovation and maintenance. The Company operates in Italy, Germany, Spain, Finland, France, Japan, Australia, North and Central America.

Tanzanian Gold

Tanzanian Royalty Exploration is a mineral resource company which engages in the acquisition of interests in and the exploration of natural resource properties in the future and the possible development of those properties where warranted. Co. commits its own resources to the initial evaluation of mineral properties and in select situations, Co. enters into joint venture agreements with other corporations to further the exploration of such properties, in exchange for annual rental/option payments and post-production royalty payments or with a view to direct development of a mine for the purpose of earning income from the sale of gold and other mined materials.

Terna S.p.A.

Trasmissione Elettricita Rete Nazionale is a grid operator for energy transmission. Co. manages electricity transmission in Italy. Co. owns the concession relating to electricity dispatching and transmission, and maintains ownership of the capital assets and responsibility for defining the NTG Development Plan and the Defence Plan.

Westinghouse Air Brake Technologies Corporation

Wabtec primarily serves the global freight rail and passenger transit industries. The company provides its products and services through two segments: Freight, which primarily manufactures and provides aftermarket parts and services for new locomotives; provides components for new and existing locomotives and freight cars; builds new commuter locomotives; and supplies rail control and infrastructure products, among others: and Transit, which primarily manufactures and services components for new and existing passenger transit vehicles, mainly regional trains, high speed trains, subway cars, light-rail vehicles and buses; and supplies rail control and infrastructure products, among others.

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

Other Reports on these Companies
Other Reports from Vermilion Research

ResearchPool Subscriptions

Get the most out of your insights

Get in touch