Vermilion Compass: Weekly Equity Strategy
Significant Downside Risk if 6480 BreaksOur outlook (as of our 3/3/26 Compass) remains near-term neutral on the S&P 500 (SPX), after being bullish for all but one week since 4/22/25 (we went neutral 11/19/25-11/25/25). Our initial concerns that we discussed since early-February stemmed from deteriorating market dynamics, and ever since then we have been "concerned about a deeper pullback, likely to 6720-6776, 6690, or 6480-6520 on SPX." SPX hit 6480-6520 support on Friday and yesterday (Monday), and the same can be said of Nasdaq 100 futures (NQ) which tested 24,000, and the Russell 2000 (IWM) which tested $245. While we are monitoring for a potential bottom here, we are increasingly concerned about a breakdown below 6480. These levels on SPX, NQ, and IWM remain crucial supports going forward, and we will downgrade our outlook to bearish if SPX breaks, and finds acceptance, below 6480. Resistance to watch is at the 200-day MA (currently 6625), but as we discussed in last week's Compass (3/18/26), we are concerned about a significant downside air pocket if 6480 is lost. Additional SPX resistances to watch include 6720-6775, 6780-6800, 6824, 6900, 6950, and 7000, while support is at 6480-6520.
Significant Downside Risk. We still see reason for caution: (1) U.S. interest rate volatility (MOVE index) surged to 11-month highs last week and remains above the crucial 85 level. (2) The U.S. dollar (DXY) is testing crucial resistance at $100.25-$100.80; an upside breakout would be bearish for global equities. (3) High yield spreads are at 9-month wides, and have widened above the crucial 320bps level. (4) Defensive Sectors (Staples, Utilities, and Real Estate) and Energy (XLE) remain leadership, which is as unhealthy as it gets. (5) WTI crude oil is consolidating, but as long as it holds above $88-$90 it remains a risk-off signal (testing $88 now)... see chart below and pages 2-4.
Big Picture Trends. The 10-year Treasury yield broke above range resistance at 4.30%; we expect rates to continue higher, and we are targeting 4.50% then 4.70-4.80%, and potentially higher. Gold and silver have pulled back significantly; $4,100 support must hold on gold, and $64 must hold on silver, or else we would turn bearish. Semiconductors (SMH) remain above $365-$375 base support. A number of important areas remain outright bearish: Financials (XLF, IAI), Discretionary (XLY), China (MCHI), and large-cap growth (IWF, MAGS)... see pages 5-6.
American Public Education is a provider of online and on-campus postsecondary education. The company provides online postsecondary education directed primarily at the needs of the military and public safety communities through American Public University System, Inc., an online university that includes American Military University and American Public University. The company provides on-campus nursing education to students in Ohio through National Education Seminars, Inc., which it refers to as Hondros College of Nursing (HCON). HCON provides nursing education to students in Ohio to serve the needs of the nursing and healthcare communities.
Laureate Education is engaged in providing higher education programs and services to students through an international network of licensed universities and higher education institutions (institutions). The company's programs are provided through institutions that are campus-based and internet-based, or through electronically distributed educational programs. The company has five reportable segments: Brazil; Mexico; Andean; Rest of World; and Online and Partnerships. The company's Online and Partnerships segment principally consists of Walden University.
Lincoln Educational Services provides post-secondary education to high school graduates and working adults. The company provides programs in automotive technology, skilled trades, which include heating, ventilating and air conditioning, welding and computerized numerical control and electronic systems technology, among other programs; healthcare services, which include nursing, dental assistant, medical administrative assistant, among other programs; hospitality services, which include culinary, therapeutic massage, cosmetology and aesthetics; and information technology, which consists of information technology programs.
Career Education's academic institutions provide education to students in a variety of disciplines through online, campus-based and blended learning programs. The company's reporting segments are: Colorado Technical University, which provides industry-relevant degree programs and academic programs in the career-oriented disciplines of business studies, nursing, computer science, engineering, information systems and technology, cybersecurity and healthcare management; and American InterContinental University, which helps personnel get the degree and provides academic programs in the career-oriented disciplines of business studies, information technologies, education and criminal justice.
Strategic Education is an education services company. The company provides campus-based and online post-secondary education offerings through two subsidiaries, Strayer University and Capella University. Strayer University provides undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, nursing, public administration, and criminal justice at physical campuses, primarily located in the eastern U.S., and online. Capella University is an online post-secondary education company that provides a variety of bachelor's, master's and doctoral degree programs primarily delivered to working adults.
Universal Technical Institute is a provider of postsecondary education for students seeking careers as automotive, diesel, collision repair, motorcycle and marine technicians as well as welders and computer numeric control machining technicians. The company provides certificate, diploma or degree programs under the banner of several brands, including Universal Technical Institute, Motorcycle Mechanics Institute and Marine Mechanics Institute and NASCAR Technical Institute. Additionally, the company provides manufacturer specific advanced training (MSAT) programs, including student-paid electives, at its campuses and manufacturer or dealer sponsored training at certain campuses and training centers.
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.
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