Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.74 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Snap-Back Rally Tests YTD Highs

We are seeing a broad-based snap-back rally after the S&P 500 found support at our 5100-5191 target/bounce area which we discussed in our 7/30/24 and 8/6/24 Compass reports. Still, we believe we are not yet out of the woods as we still see the S&P 500 and Nasdaq 100 (QQQ) going through a 1- to 4-month pullback/consolidation period, and market dynamics remain far from perfect. In light of this, we downgraded our long-term outlook to neutral in our 8/6/24 Compass after being bullish since early-November 2023. To reiterate what we discussed last week, current price action on the S&P 500 is extremely similar to prior major topping patterns that occurred in April 2000, August 2007, and February 2022, whereby the SPX pulled back 10-14%, then rallied back to test the highs before starting new bear markets. This is why we laid out our expectations in our latest Compass (8/13/24) for the S&P 500 to bounce (led by NVDA and SMH) and test YTD highs or potentially make a lower high near the 5400 or 5585 levels (though it did move above 5400 and 5585). We certainly do not know if a top is being formed, but the similarities to prior major tops is something we are watching closely.

S&P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), Dow. This past Thursday, the SPX and QQQ reversed their 1-month downtrends with an upside gap, and the IWM and the Dow established bullish island reversal gaps after breaking back above important resistances at $209-$210 and 40,000. These are bullish signs as long as the gaps remain unfilled. These levels on the IWM and Dow remain important short-term supports, as are the SPX and QQQ gaps at 5455-5500 and $463-$468. We discussed in our 8/13/24 Compass how we were expecting a rally to test YTD highs, and that large-cap growth -- and specifically NVDA and SMH -- would lead on the way up. NVDA has the second-highest gain within the SPX since last Monday's close (+19.24%). We are watching for resistance at their YTD highs on these indexes. If the SPX closes at 5783 or higher (2% above the July high), we would likely shift our long-term outlook back to bullish... see chart below and page 3.
Mixed Signals. Market dynamics have improved over the past week (see IWM and Dow above), but remain far from perfect. Outperformance and major bullish RS inflections from defensive Sectors (Staples, Utilities, Real Estate, and Health Care) remains a primary concern, as is the still-elevated bond market volatility (MOVE index). With that said, high yield spreads are back below the 382bps level... see page 4.
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.

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.

COHERENT CORP

CRANE CO NEW

Eldorado Gold Corporation

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

H&R Block Inc.

H&R Block provides assisted, do-it-yourself, and virtual tax return preparation solutions through various channels (including in-person, online and mobile applications, virtual, and desktop software) and distributes the company-branded products and services to the general public in the U.S., Canada, Australia, and their respective territories. The company also provides additional services, such as Refund Transfers, its Peace of Mind? Extended Service Plan (POM), H&R Block Emerald Prepaid Mastercard?, H&R Block Emerald Advance? lines of credit, Tax Identity Shield?, and Refund Advance loans. For its Canadian clients the company also provides POM, H&R Block Instant Refund?, and H&R Block Pay With Refund? services.

Homeland Security Corp.

IAMGOLD Corporation

IAMGold is engaged in the exploration for, development and operation of gold mining properties, and the operation of a niobium mine.

JACKSON FINANCIAL INC

Jaguar Mining Inc.

Jaguar Mining Inc. (Jaguar) is a gold mining company engaged in acquisition, exploration, development and operation of gold producing properties in Brazil. The Company holds mineral concessions comprising approximately 54,000 hectares in the Iron Quadrangle mining district of Brazil. Its projects include Turmalina, Caete and Paciencia. It holds mineral concessions totaling over 140,332 hectares in the State of Maranhao and over 34,855 hectares in the State of Ceara. Its property portfolio also includes Gurupi Project and Pedra Branca Project. The Paciencia mining complex is located approximately 50 kilometers northwest of Belo Horizonte. The Pedra Branca Project is located in the State of Ceara in northeastern Brazil. The Gurupi Project is located in the state of Maranhao Brazil. The Caete mining complex is located in the state of Minas Gerais Brazil. The Turmalina mining complex is located in the Conceicao do Para municipality in the state of Minas Gerais.

Kinross Gold Corporation

Kinross Gold is engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. As of Dec 31 2013, Co.'s proven mineral reserves for gold and silver were 1,122 ounces and 1,179 ounces respectively.7,883 7,883 7,883

MCEWEN MINING INC.

Mueller Industries Inc.

Mueller Industries is a manufacturer of copper, brass, aluminum, and plastic products. The range of these products are: copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; PEX plastic tube and fittings; refrigeration valves and fittings; compressed gas valves; fabricated tubular products; pressure vessels; steel nipples; and insulated flexible duct systems. The company also resells brass and plastic plumbing valves, plastic fittings, malleable iron fittings, faucets, and plumbing products. The company's reportable segments are Piping Systems, Industrial Metals, and Climate.

New Gold Inc.

New Gold is a gold producer engaged in gold mining and related activities including acquisition, exploration, extraction, processing and reclamation.

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.

Park-Ohio Holdings Corp.

Park-Ohio Holdings is an international company providing customers with a supply chain management outsourcing service, capital equipment used on their production lines, and manufactured components used to assemble their products. The company operates through three reportable segments: Supply Technologies, which provides Supply Management?; Assembly Components, which designs, develops and manufactures aluminum products and direct fuel injection fuel rails and pipes, fuel filler pipes, and rubber assemblies; and Engineered Products, which operates a group of manufacturing businesses that designs and manufactures a range of engineered products including induction heating and melting systems.

ROYAL GOLD INC

Royal Gold acquires and manages precious metal streams, royalties and similar interests. The company acquires existing stream and royalty interests or finances projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Royalties are non-operating interests in mining projects that provide the right to a portion of revenue or metals produced from the project after deducting specified costs, if any.

Seabridge Gold

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

Taseko Mines Limited

Taseko Mines is engaged in the exploration, acquisition, development and sale of gold copper, molybdenum, niobium and other related mines within the province of British Columbia, Canada.

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.

Vista Gold Corp.

Vista Gold and its subsidiaries operate in the gold mining industry. Co. is focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects. Co.'s principal asset is its 100.0% owned Mt. Todd gold project in the Northern Territory, Australia. Co. also holds 4.2% of the outstanding common shares in the capital of Midas Gold Corp., non-core projects in Mexico, and royalty interests in Indonesia and the U.S.

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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