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Dave Nicoski ...
  • Ross LaDuke
EUR 46.20 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

More Downside to Lead to Buying Opportunity?

Market dynamics remain largely bearish and unchanged, and we are sticking with our call that breaks of supports (3910 on S&P 500, $177.50 on IWM, and $279 on QQQ, all broken on Dec. 15) are likely to result in a test of the 2022 lows. The Nasdaq 100 (QQQ) is already testing its 2022 lows, but the S&P 500 and Russell 2000 (IWM) are still 6-9% above their 2022 lows. Depending on how the market responds to its 2022 lows, that could be a better area to increase risk.

What If We Are Wrong? If the market indexes are ready to rally from here, we want the market to prove it to us. In order to do that, we would want to see: (1) the S&P 500 break above 3910, (2) the Russell 2000 (IWM) break above $177.50, (3) cap-weighted Discretionary (XLY) break above $133, and (4) the U.S. dollar (DXY) break below $103. If these four developments play out, we would expect yet another bear market rally to unfold... see charts below and page 3.
Bearish Market Dynamics. Chief among the reasons that we expect more downside is the ongoing bearish market dynamics. The U.S. dollar (DXY) remains above 6-year base support at $103-103.70. ARK Innovation (ARKK) decisively broke 5-year support at $35, and the Renaissance IPO ETF (IPO) is below the key $26 level. RS for defensive Sectors (Staples, Health Care, Utilities) remains near multi-year highs... see pages 3-4.
Big Picture Trends. The 10-Year Treasury yield has struggled to get above our 3.9% resistance level; we see it consolidating between support at 3.4-3.5% and 3.9% for now. Gold continues to show signs of bottoming, from both a price and relative strength perspective (vs. S&P 500). WTI crude oil displays a false breakdown at $77, though is testing this support level now. Non-U.S. equities have underperformed substantially relative to U.S. equities over the past 13 years, but we are now finally starting to see signs that this trend is reversing... see pages 5-6.
Underlyings
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.

Banco Bilbao Vizcaya Argentaria S.A. Sponsored ADR

Banco Santander S.A. ADS

Barclays PLC ADS

Coca-Cola Femsa SAB de CV (ADR)

Embotelladora Andina S.A. Series B ADS

HSBC Holdings (ADR)

IAMGOLD Corporation

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

Lloyds Banking Group PLC ADS

Magnachip Semiconductor Corp.

MCEWEN MINING INC.

NatWest Group Plc

Royal Bank of Scotland Group is a banking and financial services company. Co.'s activities are organized in franchise basis; Personal and Business Banking (PBB) comprising UK PBB and Ulster Bank RoI segment, which serve individuals and small businesses in the U.K. and the Republic of Ireland; Commercial & Private Banking comprising, Commercial Banking and Private Banking segment, which serve commercial, corporate and private banking in the U.K. and Western Europe; RBS International, which serves retail, commercial and financial institution in Jersey, Luxembourg and London; and NatWest Markets, which provides risk management and financing solutions through its trading and sales operations.

NovaGold Resources Inc.

NovaGold Resources is a mineral exploration company engaged in the exploration and development of gold and copper mineral properties. Co.'s primary focus is on the Donlin Gold project in Alaska. The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly owned subsidiaries of Co. and Barrick Gold Corporation. Co. also has an interest in the Galore Creek copper-gold-silver project in British Columbia, Canada. The Galore Creek project is held by a partnership owned equally by NOVAGOLD Canada Inc., a wholly-owned subsidiary of Co., and by Teck Resources Limited.

UBS Group AG

UBS Group is a holding company. Through its subsidiary, UBS, Co. provides financial services including advisory services, underwriting, financing, market making, asset management and brokerage and retail banking. Co.'s operations are organized along five segments: Wealth Management (financial services to high net worth and ultra high net worth individuals as well as private and corporate clients); Wealth Management Americas (advice-based solutions for ultra high net worth, high net worth and core affluent individuals and families); Personal & Corporate Banking (provides financial products and services to private, corporate and institutional clients); Asset Management and Investment Bank.

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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