Vermilion Compass: Weekly Equity Strategy
Growth Improving, But Can It Last?Market dynamics remain largely positive and there continues to be an absence of breakdowns across all Sectors and the major averages. As a result, we continue to see a mixed market environment, but we remain constructive overall with the S&P 500 holding above short-term support at the 50-day moving average and 4056.
S&P 500, Micro-Caps, & Emerging Markets. The S&P 500 remains bullish, holding above key short-term support at the 50-day moving average and 4056. If the S&P 500 falls below 4056, 3980-3985 would be the next important level to watch and we would be buyers at this level. As long as 3980 holds we are constructive overall. At the other end of the market cap spectrum we are watching micro-caps (IWC), which remain above the critical $135 support level. Lastly, emerging market equities (EEM) continue to hold above major base support at $52; as long as this level holds it is a positive sign for global equities and risk sentiment... see chart below.
Short-Term Improvement For Growth, Technology. Led by strength in semiconductors (SOXX), growth areas of the market (Technology, Nasdaq 100) have gotten a recent reprieve as the 10-year Treasury yield has pulled back toward 1.5% support. We believe recent outperformance from growth (Russell 1000 Growth) and Tech (XLK) is a countertrend move and is likely to be short-lived, since RS still displays rounded tops for both. Regardless, the fact that growth and the Technology Sector are not falling apart is a positive sign for the broad market... see page 3.
Big Picture Trends. Commodities remain bullish with the Bloomberg Commodity index (DJP) still in a 13-month uptrend and holding above major base support at $25.50. Copper also remains in an uptrend and WTI crude oil continues to consolidate below the $67 multi-year resistance level, likely building-up energy for an eventual breakout. The US dollar (DXY) continues to trend lower as it tests key support at $89, the lows of 2021. High yield spreads remain stable and below 340 bps. All of this is consistent with a risk-on environment which contributes to our overall constructive outlook.... see page 4.
American Airlines Group is a holding company. Through its subsidiaries, the company's business activity is the operation of a primary network carrier, providing scheduled air transportation for passengers and cargo. The company's regional carriers provide scheduled air transportation under American Eagle. The American Eagle carriers include the company's regional carriers Envoy Aviation Group Inc., PSA Airlines, Inc. and Piedmont Airlines, Inc., as well as third-party regional carriers including Republic Airline Inc., Mesa Airlines, Inc., SkyWest Airlines, Inc. and Compass Airlines, LLC. The company's cargo division provides freight and mail services, with facilities and interline connections available across the globe.
First Commonwealth Financial is a financial holding company. Through its First Commonwealth Bank subsidiary, the company provides an array of consumer and commercial banking services. The company also provides trust and wealth management services and insurance products. The company's consumer services include internet, mobile and telephone banking, an automated teller machine network, and personal checking accounts, among others. The company's commercial banking services include commercial lending, business checking accounts, on-line account management services, automated clearing house origination, payroll direct deposit, commercial cash management services and repurchase agreements.
United Airlines Holdings is a holding company and its principal, wholly-owned subsidiary is United Airlines, Inc. (United). The company is engaged in the transportation of people and cargo throughout North America and to destinations in Asia, Europe, Africa, the Pacific, the Middle East and Latin America. The company, through United and its regional carriers, operates flights to airports, with its hubs at Newark Liberty International Airport, Chicago O'Hare International Airport, Denver International Airport, George Bush Intercontinental Airport, Los Angeles International Airport, A.B. Won Pat International Airport, San Francisco International Airport and Washington Dulles International Airport.
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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