Vermilion Compass: Weekly Equity Strategy
More Long-Term Breakouts; Bullish Outlook IntactWe remain bullish on the S&P 500 and Nasdaq 100 (QQQ), as they both refuse to close below their 20-day MAs or 21-day EMAs for more than 2-3 consecutive days. There is nothing that says this can't continue. With that said, once we do get 2-3 closes below the 20-day MAs or 21-day EMAs on the S&P 500 and QQQ, it would mark the beginning of a pullback (a potentially rapid one, at that), with next supports currently at 4983-5050 on the S&P 500 and $425-$433 on QQQ (gap supports from 2/22/24). If the S&P 500 were to break below 4983, we would expect it to find support somewhere in the 4800-4930 range; as long as 4800 holds and market dynamics remain healthy, our bullish intermediate-to-long-term outlook we initiated on November 7, 2023 will remain intact... see chart below.
Treasury Yields, U.S. Dollar (DXY). 2-, 5-, 10-, and 30-year Treasury yields are all testing important resistances of 4.77%, 4.49%, 4.35%, and 4.50%, respectively. As long as Treasury yields remain below these resistance levels, it is a clear risk-on signal for the broad equity market. With that said, bond market volatility (MOVE index) just hit 2-year lows; as long as the MOVE index remains near 2-year lows, it is quite possible that marginally higher Treasury yields will not derail the SPX bull market. The U.S. dollar (DXY) is below the major $106 level, which we continue to view as a clear risk-on signal for the broad equity market... see page 3.
Small-Caps. The Russell 2000's (IWM) breakout above the December 2023 highs is looking official, while the S&P 600 (IJR) is testing its December highs at $110.50... see page 4.
More Risk-On Signals. Cap- and equal-weighted Energy (XLE, RSPG) display 2-year base breakouts. Utilities (XLU) display a bullish 1-year downtrend reversal. Gold miners (GDX, GDXJ) are reversing 2+ year downtrends. Banks (KBE) appear to be breaking out from a 3.5-month base. Semiconductors (SMH, SOXX) remain leadership with price and RS uptrends intact. More and more broad indexes and Sectors are making bullish inflections, and there continues to be an absence of breakdowns. High yield spreads are at fresh 2+ year narrows. Defensive Sectors including Staples (XLP), Utilities (XLU), and Health Care (XLV) are at 10+ year RS lows. These risk-on signals lead us to believe any SPX pullback is likely to present a buying opportunity... see pages 5-6.
Alcoa is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting, casting, and rolling), and energy generation. Through direct and indirect ownership, the company has 30 operating locations in nine countries around the world, situated primarily in Australia, Brazil, Canada, Iceland, Norway, Spain, and United States.
Century Aluminum is a holding company. Through its subsidiaries, the company produces primary aluminum and operates aluminum reduction facilities in the U.S. and Iceland. The company's principal subsidiaries are: Century Kentucky, Inc., which operates a primary aluminum reduction facility in Hawesville, KY; Nordural ehf, which operates a primary aluminum reduction facility in Grundartangi, Iceland; Century Aluminum Sebree LLC, which operates a primary aluminum reduction facility in Robards, KY; Century Aluminum of South Carolina, which operates a primary aluminum reduction facility in Goose Creek, SC; and Nordural Helguvik ehf, which owns a greenfield primary aluminum project in Helguvik, Iceland.
Constellium N.V. designs and manufactures a range of innovative specialty rolled and extruded aluminum products, serving primarily the aerospace, packaging and automotive end-markets. Co. has a strategic footprint of manufacturing facilities located in the United States, Europe and China. Co.'s product portfolio commands higher margins as compared to less differentiated, more commoditized fabricated aluminum products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution. Co. organizes its business around three operating segments: Aerospace & Transportation, Packaging & Automotive Rolled Products, and Automotive Structures & Industry.
Eldorado Gold is engaged in the exploration, development, mining and production of gold and other mining resources in Brazil, China, Turkey and Greece.
Endeavour Silver is engaged in silver mining in Mexico and related activities including acquisition, exploration, development, extraction, processing, refining and reclamation. Co. is also engaged in exploration activities in Chile. Co. has three operating mining segments, GuanacevA, Bolanitos and El Cubo, which are located in Mexico as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico and Chile.
Freeport-McMoRan is a holding company. Through its subsidiaries, the company is a mining company. The company operates assets with proven and probable reserves of copper, gold and molybdenum, and the company is a publicly traded copper producer. The company's portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits; and mining operations in North America and South America, including the Morenci minerals district in Arizona and the Cerro Verde operation in Peru. The company has organized its mining operations into four primary divisions: North America copper mines, South America mining, Indonesia mining and Molybdenum mines.
Gold Resource produces metal concentrates that contain gold, silver, copper, lead and zinc, and dore containing gold and silver from the Aguila and Alta Gracia Projects in the southern state of Oaxaca, Mexico. The Aguila Project includes the Arista underground mine and processing facility. The Alta Gracia project includes the Mirador underground mine. The company also performs exploration and evaluation work of precious metal properties in Nevada. The company's operations in Oaxaca, Mexico are conducted through its subsidiary, Don David Gold Mexico S.A.de C.V. The company's Nevada exploration, development and construction work is performed through two subsidiaries, GRC Nevada Inc. and Walker Lane Minerals Corp.
Kaiser Aluminum manufactures and sells semi-fabricated specialty aluminum mill products. The company's aerospace and high strength products include heat treat plate and sheet, hard alloy extruded shapes, cold finish rod and bar, drawn tube and billet used for a variety of end uses in the aerospace and defense industries. Automotive Extrusions consist of extruded aluminum products for several North American automotive applications. The company's general engineering products consists of 6000-series alloy plate, sheet, rod, bar, tube, wire and standard extruded shapes. Other products consist of extruded, drawn and cast billet aluminum products for a range of North American industrial end uses.
New Gold is a gold producer engaged in gold mining and related activities including acquisition, exploration, extraction, processing and reclamation.
Seabridge Gold is a development stage company engaged in the acquisition and exploration of gold properties located in North America.
Sierra Metals is an exploration-stage company. Co. is engaged in the business of acquisition, exploration and development of mineral properties. The recoverability of costs relating to the mining properties is dependent upon the determination of economically recoverable reserves and resources, maintenance of Co.'s interest in the underlying mineral concessions, receipt of necessary permits and the ability, when needed, of Co. to obtain the necessary financing to complete the development and construction of processing facilities, on-site where applicable, as well as future profitable production.
PT Supreme Cable Manufacturing & Commerce Tbk, also known as PT Sucaco Tbk, is an Indonesia-based company primarily engaged in manufacturing cables. Its products include building wires, low-voltage power cables, medium-voltage power cables, high-voltage power cables, instrument cables, enameled wires, fiber optic cables and telecommunication cables. It has manufacturing facilities in Jakarta, Bekasi and Tangerang, Indonesia. It is engaged in manufacturing insulation materials, such as pelleted cross-linked polyethylene, polypropylene (PP) and polyvinyl chloride (PVC), through its subsidiaries, PT Setia Pratama Lestari Pelletizing Industries. It also produces melamine, resin and melamine sheets through its subsidiary, PT Supreme Decoluxe.
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.
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.
Western Copper and Gold is an exploration stage company that is engaged in exploration and development of the Casino mineral property located in Yukon, Canada. The Casino property is host to one of the undeveloped porphyry deposits in Canada containing large amounts of gold, copper, and molybdenum in its one billion tonnes of reserves.
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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