Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.71 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Bullish Outlook Intact; Buy Dips

In last week's Compass we posited that the bulls were back in control as the bullish gap from Sept. 28 was left unfilled despite the president and first lady getting COVID-19. With breadth continuing to improve and several cyclical areas of the market breaking out to new highs, our outlook remains bullish and we believe a “buy the dip” mentality is warranted.

· Key Levels. Last week we said to watch resistance levels of 3425 on the S&P 500 and 11,606 on the Nasdaq 100, noting that breakouts above these levels would create a clear path to all-time highs for both indexes. These aforementioned levels are now short-term support. As for potential resistance, we are watching the all-time highs of 3588 on the S&P 500 and 12,440 on the Nasdaq 100. Needless to say, new all-time highs would help cement our already bullish outlook. Additionally, the small-cap Russell 2000 (IWM) broke above $160 resistance to hit highs not seen since February, and $159-160 is now short-term support on the IWM -- this breakout is very bullish for the broad market... see charts below.

· Cyclicals Breaking Out To New Highs. Several cyclical areas of the market are breaking out to new highs and remain leadership, something that helps support our overall bullish outlook. Areas that are breaking out to all-time highs include the PHLX Semiconductor index (SOXX), Dow Transports (IYT), and Consumer Discretionary Sector (XLY). If these areas are hitting all-time highs it tells us other areas are likely to follow. Additional areas hitting 8- and 9-month highs include Industrials (XLI), small-caps (IWM), and emerging markets (EEM)... see pages 3-4.

· Breadth Continues To Improve. Advance/decline (A/D) lines are breaking to all-time highs for the S&P 500, Nasdaq 100, and Russell 3000. This tells us breadth is healthy and expanding -- a requirement for any broad-based bull market... see page 5.
Underlyings
AGCO Corporation

AGCO is a manufacturer and distributor of agricultural equipment and related replacement parts. The company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The company's products are used in the agricultural equipment industry and are marketed under the Challenger?, Fendt?, GSI?, Massey Ferguson? and Valtra? brands. The company distributes its products through independent dealers and distributors. In addition, the company provides retail and wholesale financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.

Cabot Corporation

Cabot is a specialty chemicals and performance materials company. The company's principal products are rubber and specialty grade carbon blacks, specialty compounds, fumed metal oxides, activated carbons, inkjet colorants, and aerogel. The company's segments are: Reinforcement Materials, which combines the rubber blacks and elastomer composites product lines; Performance Chemicals, which combines its specialty grades of carbon black, fumed metal oxides and aerogel product lines in its Performance Additives business, and combines its specialty compounds and inkjet product lines in its Formulated Solutions business; and Purification Solutions, which represents the company's activated carbon business.

Cemex SAB de CV (ADR)

Chaopraya Mahanakorn Public Co. Ltd.

CROWNIA HOLDINGS

Deere & Company

Deere & Co. operates the following segments: Agriculture and Turf, which manufactures and distributes a line of agriculture and turf equipment and related service parts, including utility tractors, tractor loaders, combines, cotton pickers, cotton strippers, and sugarcane harvesters; Construction and Forestry, which manufactures and distributes a range of machines and service parts used in construction, earthmoving, road building, material handling and timber harvesting, including backhoe loaders and crawler dozers and loaders; and Financial Services, which finances sales and leases by the company's dealers of new and used agriculture and turf equipment and construction and forestry equipment.

Koppers Holdings Inc.

Koppers Holdings is a holding company. Through its subsidiaries, the company is a provider of treated wood products, wood treatment chemicals, and carbon compounds. The company operates three principal business segments: Railroad and Utility Products and Services, which supplies railroad crossties to the North American railroads; Performance Chemicals, which manufactures and supplies water-based wood preservatives and wood specialty additives to treaters who supply the residential, agricultural and industrial pressure-treated wood markets; and Carbon Materials and Chemicals, which processes coal tar into a variety of products, including creosote and other related railroad products.

Kubota Corp. ADS

Martin Marietta Materials Inc.

Martin Marietta Materials is a natural resource-based building materials company. The company supplies aggregates (crushed stone, sand and gravel) through its network of quarries, mines and distribution yards. The company also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services. The company conducts its Building Materials business through three segments: Mid-America Group, Southeast Group and West Group. The Mid-America and Southeast Groups provide aggregates products only. The West Group provides aggregates, cement and downstream products. The company also has the Magnesia Specialties segment, which includes its magnesia-based chemicals and dolomitic lime businesses.

Methanex Corporation

Methanex is a producer and supplier of methanol to the international markets of Asia Pacific, North America, Europe and South America. Co.'s operations consist of the production and sale of methanol, a commodity chemical.

Nucor Corporation

Nucor manufactures steel and steel products. The company's operations include international trading and sales companies that buy and sell steel and steel products. The company's segments are: steel mills, which produces sheet steel, plate steel, structural steel, and bar steel; steel products, which produces hollow structural section steel tubing, electrical conduit, steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems, and wire and wire mesh; and raw materials, which produces direct reduced iron (DRI), brokers ferrous and nonferrous metals, pig iron, hot briquetted iron and DRI, supplies ferro-alloys, and processes ferrous and nonferrous scrap metal.

Olympic Steel Inc.

Olympic Steel is a metals service center that operates in three segments; carbon flat products, specialty metals flat products, and tubular and pipe products. The company's carbon flat products segment's focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. The company's specialty metals flat products segment's focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. The company distributes metal tubing, pipe, bar, valves and fittings and fabricate pressure parts through its tubular and pipe products segment.

Orion Engineered Carbons SA

Reliance Steel & Aluminum Co.

Reliance Steel & Aluminum is a metals service center company. The company provides metals processing services and distributes a line of metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products, to its customers in a range of industries, including general manufacturing, non-residential construction (including infrastructure), transportation (rail, truck trailer and shipbuilding), aerospace and defense, energy (oil and gas), electronics and semiconductor fabrication, and heavy industry (agricultural, construction and mining equipment). The company also services the auto industry, primarily through its toll processing operations.

Schnitzer Steel Industries Inc. Class A

Schnitzer Steel Industries is engaged as a recycler of ferrous and nonferrous scrap metal, including end-of-life vehicles, and a manufacturer of finished steel products. The company has two segments: Auto and Metals Recycling, which acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors and brokers, and procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores; and Cascade Steel and Scrap, which produces a range of finished steel long products using ferrous recycled scrap metal and other raw materials.

Steel Dynamics Inc.

Steel Dynamics is a steel producer and metal recycler. The company manufactures and sells steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joists and deck products. The company's segments are: Steel, which produces steel from ferrous scrap and scrap substitutes, utilizing casting, automated rolling mills and several downstream steel coating and bar processing lines, and Iron Dynamics; metals recycling, which involves the purchase, processing, and resale of ferrous and nonferrous scrap metals into reusable forms and grades; and steel fabrication, which produces steel building components, including steel joists, girders, trusses, and steel deck.

Summit Materials Inc. Class A

Summit Materials is a holding company. Through its subsidiaries, the company is a construction materials company. The company produces and sells aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. The company is engaged in paving and related services. The company has operations in various states across the United States and in British Columbia, Canada. The company operates a municipal waste landfill in its East segment, and has construction and demolition debris landfills and liquid asphalt terminal operations in its West and East segments.

Titan Machinery

Titan Machinery owns and operates a network of agricultural and construction equipment stores. The company has three segments: Agriculture, Construction and International, within which the company engages in: new and used equipment sales; parts sales; equipment repair and maintenance services; and equipment rental and other activities. The agricultural equipment the company sells and services includes machinery and attachments for uses ranging from farming to home and garden use. The construction equipment the company sells and services includes heavy construction machinery, light industrial machinery, road and highway construction machinery, mining, energy, and forestry operations equipment.

Valmont Industries Inc.

Valmont Industries is a global producer of fabricated metal products. The company's segments are: Engineered Support Structures, which engineers and manufactures steel, aluminum, and composite poles and structures to which lighting and traffic control fixtures are attached for a range of outdoor lighting applications; Utility Support Structures, which engineers and manufactures tapered steel, pre-stressed concrete and hybrid structures, and steel lattice structures; Coatings, which provides the following services, including hot-dipped galvanizing, anodizing, powder coating, and e-coating; and Irrigation, which manufactures and distributes mechanical irrigation equipment and related service parts.

Victorias Milling

Victorias Milling is a holding company based in the Philippines. Through its subsidiaries, Co. is engaged in the production of refined and raw sugar, fish, beef, pork, cut-flowers, vegetables, fuelwood, fertilizers, machined products, fiberglass, reinforced plastic products, locomotives, oxygen, acetylene, farm machinery, and handicrafts; packaging products, slaughtering and marketing of pigs; and processing of raw and refined sugar, alcohol, meat products, fish, vegetables, and fruit canning. Co. also offers transportation services by sea and land.

Westlake Chemical Corporation

Westlake Chemical operates as a manufacturer and marketer of basic chemicals, vinyls, polymers and building products. The company operates in two operating segments: Olefins, which manufactures and markets polyethylene, styrene monomer and various ethylene co-products; and Vinyls, which manufactures and markets polyvinyl chloride (PVC), vinyl chloride monomer, ethylene dichloride, chlor-alkali (chlorine and caustic soda), chlorinated derivative products and ethylene, as well as manufactures and sells building products fabricated from PVC, including residential siding, trim and mouldings, pipe and fittings for various water, sewer and industrial applications, and profiles for windows and doors.

Worthington Industries Inc.

Worthington Industries is a metals manufacturing company, focused on steel processing and manufactured metal products. The company operates three segments: Steel Processing, which buys coils of steel from integrated steel mills and mini-mills and processes them to customer specifications; Pressure Cylinders, which manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, well water and expansion tanks, and oil and gas equipment with accessories and related products for end-use market applications; and Engineered Cabs, which designs and manufactures custom-engineered open and enclosed cabs and operator stations and custom fabrications and packaging for mobile equipment.

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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