Vermilion Compass: Weekly Equity Strategy
Cyclical Value Areas Improving -- Add ExposureCyclical value areas are starting to play catch-up as interest rates show signs of bottoming -- all kickstarted by Friday's better-than-expected employment report. We see many actionable opportunities, particularly within the Financial and Materials Sectors, and also several retail stocks within Consumer Discretionary. As we noted last week, despite mixed signals from the market, there continues to be an absence of breakdowns at the index and Sector level which supports our overall constructive outlook.
S&P 500. The S&P 500 remains bullish and the 50-day MA remains major support at 4317; as long as the 50-day MA holds, we expect to see rallies to 4500 followed by 4620. Should the 50-day MA (4317) fail to hold we expect more sideways to downward price action, as it would likely kickstart a 5-15% pullback. Should the 50-day MA break, our next support levels to watch would be 4257, 4233, and 4164.
Rising 10-Yr Treasury Yield Leads To Improvement For Cyclicals/Value. Rapidly declining yields have been a big reason for our recent cautious tone on the broad market, so the potential bottoming pattern on the 10-year yield is a welcomed sight on many fronts. It is worth noting the copper vs. gold ratio supports the idea that rates are bottoming. We believe reducing exposure to growth (Tech, FAANG) and adding to value makes sense as value likely plays catch-up. Financials display bullish price and RS inflections with the XLF nearing a breakout above its June highs at $38.60 -- something that would be very bullish for both Financials and the broad market. Additionally, banks (KRE, KBE) display false breakdowns, which are very bullish patterns. We highlight several actionable buy opportunities within Financials, including WFC, COF, DFS, GS, JEF, and RJF... see charts below and pages 2-5.
Small-Caps & Micro-Caps. If the 10-year yield has indeed found a floor at 1.13%, this could be the beginning of a broad-based rally for stocks. We continue to watch the Russell 2000 (IWM) and Russell Micro Caps (IWC) for potential breakouts above $234.50 and $159, respectively. Breakouts would signal a new, broad-based rally is upon us... see page 6.
Albemarle is a global developer, manufacturer and marketer of chemicals across a range of end markets including energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals, crop protection and custom chemistry services. The company's segments include: Lithium, which develops and manufactures a range of basic lithium compounds and lithium specialties and reagents; Bromine Specialties, which includes products used in fire safety solutions and other chemicals applications; and Catalysts, which includes Clean Fuels Technologies, fluidized catalytic cracking catalysts and additives, and performance catalyst solutions.
AMN Healthcare Services provides talent solutions for the healthcare sector. The company's talent solutions provides management, staffing, recruitment, technology, analytics, and related services to manage healthcare workforce needs. The company provides its healthcare personnel, from nurses, doctors, and allied health personnel to healthcare leaders and executives. The company's workforce solutions and staffing services include: travel nurse staffing; rapid response nurse staffing and labor disruption services; local, or per diem, staffing; locum tenens staffing; allied staffing; physician permanent placement services; interim leadership staffing and executive search services; and recruitment process outsourcing.
ASGN provides information technology (IT) and other services in the technology, digital, creative, engineering and life sciences fields across commercial and government sectors. The company's segments are: Apex, which provides technical, digital, creative, scientific and engineering personnel for contract, contract-to-hire, and permanent placement positions to clients across the United States and Canada; Oxford, which provides staffing and permanent placement services in select skill and geographic markets in the United States and Europe; and ECS, which delivers solutions in cloud, cybersecurity, artificial intelligence, machine learning, application and IT modernization, science and engineering.
Barrett Business Services is a provider of business management solutions for small-and mid-sized companies. The company has two categories of services: Professional Employer Services, in which the company enters into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers' compensation coverage and certain other administrative functions for the client's existing workforce; and Staffing, which includes on-demand or short-term staffing assignments, contract staffing, direct placement, and long-term or indefinite-term on-site management.
Ceridian HCM Holding is a holding company. Through its subsidiaries, the company is a human capital management (HCM) software company. Dayforce, the company's cloud HCM platform, provides human resources (HR), payroll, benefits, workforce management, and talent management functionality. In addition to Dayforce, the company sells Powerpay, a cloud HR and payroll solution for the Canadian small business market, through both direct sales and established partner channels. The company also continues to support customers using its Bureau solutions, which it generally stopped selling to new customers. The company invests in maintenance and necessary updates to support its Bureau customers and continues to migrate them to Dayforce.
Cross Country Healthcare provides healthcare staffing, recruiting and workforce solutions. The company's business consists of three business segments: Nurse and Allied Staffing, which provides staffing, recruiting, and workforce solutions including temporary and permanent placement of travel and local branch-based nurse and allied personnel; Physician Staffing, which provides physicians, certified registered nurse anesthetists, nurse practitioners and physician assistants under its Medical Doctor Associates brand; and Other Human Capital Management Services, which is comprised of retained and contingent search services for physicians, healthcare executives, and other healthcare personnel.
Insperity provides a range of human resources (HR) and business solutions. The company's HR services offerings are provided through its Workforce Optimization? and Workforce Synchronization? solutions, which encompass a range of human resources functions, including payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development services, along with its cloud-based human capital management platform, its Insperity Premier?. In addition to its Professional Employer Organization HR Outsourcing solutions, the company provides Workforce Acceleration?, a payroll and human capital management solution.
Kelly Services provides workforce solutions to customers in the Americas, Europe, the Middle East, and Africa, and Asia Pacific regions. The company's segments include: Americas Staffing, which delivers temporary staffing, as well as direct-hire placement services, in a number of staffing services such as office, education, marketing, and electronic assembly; International Staffing, which provides a similar range of staffing services as its Americas Staffing segment, including office, engineering, finance and accounting, information technology, and science; and Global Talent Solutions, which combines the delivery structure of its and consulting group and centrally delivered staffing business.
ManpowerGroup provides a range of workforce solutions and services, which include recruitment and assessment, training and development, career management, outsourcing, and workforce consulting. The company's family of brands and offerings includes Manpower, Experis, Right Management, and ManpowerGroup Solutions. The company's portfolio of recruitment services includes permanent, temporary and contract recruitment of professionals, as well as administrative and industrial positions. All of these services are provided under its Manpower and Experis brands. The company provides services under its Experis brand, particularly in the areas of Information Technology, Engineering, and Finance.
Olin is a manufacturer and distributor of chemical products and a manufacturer of ammunition. The company's Chlor Alkali Products and Vinyls segment manufactures and sells, among others chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, and perchloroethylene. The Epoxy segment produces and sells a range of epoxy materials, including allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and downstream products. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
Robert Half International provides staffing and risk consulting services. The company, through its Accountemps, Robert Half Finance & Accounting, and Robert Half Management Resources divisions, is a provider of temporary, full-time, and project personnel in accounting and finance fields. The company's OfficeTeam division places office and administrative personnel, ranging from executive and administrative assistants to receptionists and customer service representatives. The Robert Half Technology division provides information technology contract consultants, places employees, and provides managed services in areas ranging from multiple platform systems integration to end-user technical and desktop support.
TriNet Group is a provider of human resources (HR) solutions, payroll services, employee benefits and employment risk mitigation services for small to midsize businesses. The company delivers a suite of products and services, that facilitates the administration and management of various HR-related functions for its clients, including compensation and benefits, payroll processing, employee data, health insurance and workers' compensation programs, and other transactional HR needs using its technology platform. The company's products include TriNet Financial Services, TriNet Life Sciences, TriNet Main Street, TriNet Nonprofit, TriNet Professional Services, and TriNet Technology.
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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