Report
Dave Nicoski ...
  • Ross LaDuke
EUR 234.38 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Nearing short-term overbought extremes

The positive news surrounding trade and dovish Fed rhetoric has continued to flow, resulting in a reversal from oversold extremes in late December to the current overbought extreme according to the S&P 500's percentage of stocks above their 50-day moving average (see chart below). We continue to believe the market is going through a bottoming process, and we prefer to be on the cautious side at current levels considering how far and how quickly the market has risen. As good news continues to be built-in to the market surrounding trade, it creates the potential for a “sell the news” event once a deal is announced.

• Relative Strength Rankings (RSR). We continue to see RS deterioration in defensive Sectors, and improvement for cyclical Sectors... see page 2.

• Levels to watch; breadth improving. The S&P 500 has taken out another meaningful resistance level, recently breaking above its 200-day moving average. The next potential resistance level to monitor is 2,817. Breadth indicators are healthy with the S&P 500's A-D line hitting new highs. We also review the equal-weighted S&P 500... see page 3.

• Small- vs. large-cap; Growth vs. value. We are shifting to overweight small-caps and remain overweight growth vs. value... see page 4.

• USD, emerging markets, and gold. The U.S. dollar remains a critical component for global markets. We believe a gradual weakening would likely benefit emerging markets (EEM) and foreign equities, which would also aid our markets' advance. Additionally, a weaker dollar should be a tailwind for gold prices and other commodities... see page 5.
Underlyings
Agnico Eagle Mines Limited

Agnico-Eagle Mines is a gold mining company with mining operations in Canada, Mexico and Finland. Co. earns a proportion of its revenues from the production and sale of gold in both dore bar and concentrate form. The remainder of revenue and cash flow is generated by the production and sale of byproduct metals. The revenue from byproduct metals is mainly generated by production at the LaRonde mine in Canada (silver, zinc, copper and lead) and the Pinos Altos mine in Mexico (silver).

Alamos Gold Inc.

Alamos Gold is engaged in the exploration, mine development, and the mining and extraction of precious metals, primarily gold. Co.'s s primary asset is the Mulatos Mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes several known satellite gold occurrences.

B2Gold Corp.

B2Gold is a Vancouver-based gold producer with three operating mines (two in Nicaragua and one in the Philippines), a fourth mine which has entered into the commissioning and testing phase in Namibia and a portfolio of development and exploration assets in Mali, Colombia, Burkina Faso and Nicaragua. Co.'s reportable operating segments include its mining operations and development projects. The Other Mineral Properties segment consists of Co.'s interests in mineral properties which are at various stages of exploration. The Corporate and Other segment includes corporate operations and the Bellavista property in Costa Rica which is classified as held for sale.

Barrick Gold Corporation

Barrick Gold is engaged in the production and sale of gold, as well as related activities such as exploration and mine development. Co. also produces copper and hold interests in oil and gas properties located in Canada. Co.'s mining operations are concentrated in three regional business units: North America, South America and Australia Pacific. Co. also hold a 73.9% equity interest in African Barrick Gold plc that owns gold mines and exploration properties in Africa. Co.'s copper business unit contains producing copper mines located in Chile and Zambia; and a mine under construction located in Saudi Arabia.

Ciena Corporation

Ciena is a networking systems, services and software company, providing solutions that enable a range of network operators to deploy and manage networks that deliver services to businesses and consumers. The company provides hardware, software and services that support the transport, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. The company's solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and other network operators.

Compania de Minas Buenaventura SAA Sponsored ADR

Corning Inc

Corning is a provider of glass for notebook computers, flat panel desktop monitors, display televisions, and other information display applications; carrier network and enterprise network products for the telecommunications industry; ceramic substrates for gasoline and diesel engines in automotive and heavy duty vehicle markets; laboratory products for the scientific community and specialized polymer products for biotechnology applications; optical materials for the semiconductor industry and the scientific community; and other technologies. The company reportable segments are: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials and Life Sciences.

DASAN Zhone Solutions

DASAN Zhone Solutions is a provider of ultra-broadband network access solutions and communications platforms. The company researchs, develops, tests, sells, manufactures and supports platforms in five areas: broadband access, mobile backhaul, Ethernet switching with Software Defined Networking (SDN) capabilities, new enterprise solutions based on Passive Optical LAN, and new generation of SDN/Network Function Virtualization solutions for unified wired and wireless networks. The company's broadband access products provide a variety of options for carriers and service providers to connect residential and business customers.

Eldorado Gold Corp.

Eldorado Gold is engaged in the exploration, development, mining and production of gold and other mining resources in Brazil, China, Turkey and Greece.

Finisar Corporation

Finisar is engaged in optical communications, providing components and subsystems to networking equipment manufacturers, data center operators, telecom service providers, consumer electronics and automotive companies. The company's optical subsystems consist primarily of transmitters, receivers, transceivers, transponders and active optical cables, which provide the optical-electrical, or optoelectronic interface for interconnecting the electronic equipment used in these networks, including the switches, routers, and servers used in wireline networks as well as the antennas and base stations used in wireless networks. The company also provides products known as wavelength selective switches.

Franco-Nevada Corporation

Franco-Nevada is a gold-focused royalty and stream company with additional interests in silver, platinum group metals, oil and gas and other resource assets located in the U.S., Canada, Mexico, Peru, Chile and Africa. Co.'s portfolio includes 340 mineral and oil and gas assets covering properties at various stages from production to early stage exploration.

Goldcorp Inc.

Goldcorp is a gold producer engaged in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico, and Central and South America. Co.'s metal properties consist of gold, silver, copper, lead and zinc.

Hecla Mining Company

Hecla Mining and its subsidiaries discover, acquire and develop mines and other mineral interests and produce and market concentrates, carbon material and dore containing silver, gold, lead and zinc. The company has five units: the Greens Creek, Lucky Friday, Casa Berardi, San Sebastian and Nevada Operations units. The company produces zinc, lead and bulk flotation concentrates at its Greens Creek unit and lead and zinc flotation concentrates at its Lucky Friday unit, each of which the company sells to custom smelters and metal traders on contract. The company also produces unrefined gold and silver bullion bars (dore), loaded carbon and precipitates at its Casa Berardi, San Sebastian and Nevada Operations units.

Kirkland Lake Gold Ltd.

Kirkland Lake Gold is a Canadian gold mining and exploration company with three producing mines in Australia: the Fosterville Gold Mine and the Stawell Gold Mine in the State of Victoria and the Cosmo Gold Mine in the Northern Territory. Co. also has a portfolio of development opportunities on its significant land package, including the Big Hill Project at Stawell and various projects in the Northern Territories. In addition, Co. owns title to a mining lease located in north-central Newfoundland, Canada.

MAG Silver Corp.

MAG Silver is an exploration company conducting work on mineral properties it has staked or acquired by way of option agreement, principally in Mexico. Co. has not yet determined whether the properties on which it is conducting exploration contain any ore reserves that are economically recoverable. The recoverability of these amounts is dependent upon the existence of economically recoverable reserves, Co.'s ability to obtain the necessary financing to complete the development of the interests, and future profitable production, or alternatively, upon Co.’s ability to dispose of its interests on a profitable basis.

Newmont Corporation

Newmont is primarily a gold producer with operations and/or assets in the United States, Canada, Mexico, Dominican Republic, Peru, Suriname, Argentina, Chile, Australia and Ghana. The company is also engaged in the production of copper, silver, lead and zinc. The company's operations are organized in five geographic regions; North America, South America, Australia, Africa and Nevada.

North American Palladium Ltd.

North American Palladium is engaged in the exploration, mining, acquisition and production of palladium, gold, platinum, nickel, copper and other precious metals properties in Canada.

Orbotech Ltd.

Orbotech is engaged in the design, development, manufacture, marketing and service of yield-enhancing and production solutions for the supply chain of the electronics industry. Co. is a provider of yield enhancement and production solutions for electronics reading, writing and connecting, used by manufacturers of printed circuit boards, flat panel displays, advanced packaging, micro-electro-mechanical systems and other electronic components. Co. operates in three business segments: Production Solutions for the Electronics Industry, Solar Energy and Recognition Software.

Seabridge Gold

Seabridge Gold is a development stage company engaged in the acquisition and exploration of gold properties located in North America.

SSR Mining Inc

SSR Mining is engaged in the acquisition, exploration, development and operation of silver-dominant resource properties located in the Americas. Co.'s strategic focus is to optimize the production of silver from its Pirquitas mine in Argentina, and to advance other principal development and exploration projects including San Luis in Peru, Diablillos in Argentina, and Pitarrilla and San Agustin in Mexico. In addition to its principal projects, Co. holds a geologically-diverse portfolio of other predominantly silver projects in various stages of exploration.

Viavi Solutions Inc

Viavi Solutions is a provider of network test, monitoring and assurance solutions to communications service providers, enterprises, network equipment manufacturers, civil government, military and avionics customers. The company operates the following business segments: Network Enablement, which provides testing solutions that access the network to perform build-out and maintenance tasks; Service Enablement, which provides embedded systems and enterprise performance management solutions; and Optical Security and Performance Products, which designs, manufactures, and sells products targeting anti-counterfeiting, consumer and industrial, government, healthcare and other markets.

Wheaton Precious Metals Corp

Wheaton Precious Metals is engaged in the silver mining business.

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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