Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.02 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

S&P 500 Downtrend Channel Intact & Testing Support

We see the S&P 500 as trading within a downtrend channel; as long as it remains within this channel, our intermediate to long-term outlook is bearish at the index level. With that said, the S&P 500 is currently testing support within the downtrend channel, and we are on watch for a potential bear market rally.

S&P 500. Last week, on May 18th, the NYSE had a 93% downside volume day, effectively negating the May 13th 92% upside day. Still, the 3858 support level we noted last week held on a closing basis, and 3800-3860 remains the current S&P 500 support area to watch. Now we will need to see a bullish reversal of the 1-month downtrend (currently at 4030-4050) in order to have confidence that a tradeable bounce is underway, with the potential for more... see chart below.
Defensive Sectors Still Outperforming. We continue to see outperformance from defensive Sectors such as Utilities (XLU), Health Care (XLV), and Staples (XLP) as a risk-off signal for the broad market, and RS will need to roll over for these Sectors in order for the market to bottom. Last week we did get a steep 1.5-month RS uptrend violation on the XLP, but as we explain on page 2, it is not something we are viewing as healthy for the broad market... see pages 2-3.
US Dollar Top to Fuel Non-US Equities? The strong US dollar (DXY) has been a clear risk-off signal, and we have wanted to see the DXY top to help confirm the broad market is bottoming. We are finally seeing signs that the DXY could be topping as it broke below the major $104 level, though we would like to see it get below $99.40 to help solidify a top. As long as the DXY remains below $104 we expect to see outperformance from EM and non-US equities... see page 4.
Concerns. High yield spreads remain on a sharp widening path. Meanwhile, equal-weighted Consumer Discretionary (RCD) and retail (XRT) continue to hit new lows and remain in price and RS downtrends. We will need to see reversals in order for us to have confidence that the broad equity market is putting in a reliable bottom... see page 5.
Underlyings
AMGEN INC

APA Corporation

Cenovus Energy Inc.

Cenovus Energy is in the business of development, production and marketing of crude oil, natural gas and natural gas liquids ("NGLs") in Canada with refining operations in the U.S. Co. operates in two business segments: Upstream, which includes Co.'s development and production of crude oil, NGLs in Canada, is organized into two operations: Oil sands and conventional; and Refining and Marketing, which is focused on the refining of crude oil products into petroleum and chemical products at two refineries located in the U.S. This segment also markets Co.'s crude oil and natural gas, as well as third-party purchases and sales of product.

CNO Financial Group Inc.

CNO Financial Group is a holding company for a group of insurance companies. The company's Bankers Life segment underwrites, markets and distributes Medicare supplement insurance, interest-sensitive life insurance, life insurance, fixed annuities and long-term care insurance products. The company's Washington National segment underwrites, markets and distributes supplemental health and life insurance to middle-income consumers at home and at the worksite. The company's Colonial Penn segment markets primarily graded benefit and simplified issue life insurance directly to customers in the senior middle-income market through television advertising, direct mail, the internet and telemarketing.

CONOCOPHILLIPS

ConocoPhillips is an exploration and production company engaged in exploring for, producing, transporting and marketing crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids. The company's segments include: Alaska, which operates in Alaska; Lower 48, which operates in the United States and the Gulf of Mexico; Canada, which operates in Alberta and British Columbia; Europe and North Africa, which consists of operations and exploration activities in Norway, the United Kingdom and Libya; Asia Pacific and Middle East, which operates in China, Indonesia, Malaysia, Australia, Qatar, and Timor-Leste; and Other International, which operates in Colombia, Chile and Argentina.

CVR Energy Inc.

CVR Energy is a holding company. The company is engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining, LP (CVR Refining) and CVR Partners, LP (CVR Partners). CVR Refining is an independent petroleum refiner and marketer of transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of urea ammonium nitrate and ammonia. The company's segments include: Petroleum, which includes refineries located in Coffeyville, KS and Wynnewood, OK and supporting logistics assets in the region; and Nitrogen Fertilizer, which includes nitrogen fertilizer manufacturing facilities located in Coffeyville, KS and East Dubuque, IL.

Devon Energy Corporation

Devon Energy is an independent energy company engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids. The company's operations are concentrated in various onshore areas in United States. The company's areas of operation include Delaware Basin, Eagle Ford, Powder River Basin and the STACK development, located primarily in Oklahoma's Canadian, Kingfisher and Blaine counties.

EOG Resources Inc.

EOG Resources, together with its subsidiaries, explores for, develops, produces and markets crude oil, natural gas liquids and natural gas primarily in main producing basins in the United States, The Republic of Trinidad and Tobago, The People's Republic of China, Canada and, from time to time, select other international areas.

Equinor ASA

Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.

Hess Corporation

Hess is a global exploration and production company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquid (NGL), and natural gas with production operations located primarily in the United States, Guyana, the Malaysia/Thailand Joint Development Area, Malaysia and Denmark. The company's Midstream operating segment provides fee-based services, including gathering, compressing and processing natural gas and fractionating NGL; gathering, terminaling, loading and transporting crude oil and NGL; storing and terminaling propane, and water handling services primarily in the Bakken shale play in the Williston Basin area of North Dakota.

HOLLYFRONTIER CORP

Madison Pacific Properties Inc. Cl B

Madison Pacific Properties is engaged in owning, developing and operating industrial and commercial real estate properties located in British Columbia. As of Dec 31 2010, Co.'s property portfolio was comprised of interests in 1,152,358 sq. ft. of net rentable area of industrial properties, 190,383 sq.ft. of net rentable area of retail/highway commercial properties, and 59,080 sq.ft. of net rentable area of office property for a combined total of 1,401,821 sq. ft.

Marathon Oil Corporation

Marathon Oil is an independent exploration and production company focused on the United States resource plays. The company also has international operations in Equatorial Guinea (E.G.). The company's segments are: United States, which explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in the United States; and International, which explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States as well as produces and markets products manufactured from natural gas, such as liquefied natural gas and methanol, in E.G.

Murphy USA Inc.

Murphy USA is a holding company. Through its subsidiaries, the company's business consists primarily of the marketing of retail motor fuel products and convenience merchandise through its retail stores. The company's retail stores are located in the Southeast, Southwest and Midwest United States. The company's business also includes certain product supply and wholesale assets, including product distribution terminals and pipeline positions. The company purchases fuel from oil companies, independent refiners, and other marketers, and it sells fuel to its customers. In addition to the motor fuel sold at the company's stores, its stores carry a selection of snacks, beverages, tobacco products and non-food merchandise.

Occidental Petroleum Corporation

Occidental Petroleum has three reporting segments: oil and gas, which explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas; chemical, which mainly manufactures and markets basic chemicals (chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride) and vinyls (vinyl chloride monomer, polyvinyl chloride and ethylene); and marketing and midstream, which purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide and power.

Ovintiv Inc

Encana is an energy producer that is focused on developing its multi-basin portfolio of oil, natural gas liquids (NGL) and natural gas producing plays. The company's reportable segments are: Canadian Operations, which includes the exploration for, development of, and production of oil, NGLs, natural gas and other related activities within Canada; USA Operations, which includes the exploration for, development of, and production of natural gas, oil and NGLs and other related activities within the U.S.; and Market Optimization activities are managed by the Midstream, Marketing & Fundamentals team, which is primarily responsible for the sale of the company's proprietary production to third party customers.

PBF Energy Inc. Class A

PBF Energy is a holding company. Through its subsidiaries, the company is engaged as an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the U.S. The company operates in two business segments: refining, which the company produces a variety of products at each of its refineries such as gasoline, ultra-low-sulfur diesel, heating oil, jet fuel, lubricants, petrochemicals and asphalt; and logistics, which through its PBF Logistics LP subsidiary, the company owns or leases, operates, develops and acquires crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets.

Petroleo Brasileiro S/A ADS

Phillips 66

Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. The company's segments include: Midstream, which provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and natural gas liquids transportation, storage, processing and marketing services; Chemicals, which manufactures and markets petrochemicals and plastics on a worldwide basis; Refining, which refines crude oil and other feedstocks into petroleum products; and Marketing and Specialties, which purchases for resale and markets refined petroleum products, mainly in the United States and Europe.

Suncor Energy Inc.

Suncor Energy is an energy company. Co.'s operations include oil sands development and upgrading, onshore and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Co.'s segments include: oil sands, which develop and produce synthetic crude oil and related products through the recovery and upgrading of bitumen; exploration and production, which include offshore activity, and the exploration and production of crude oil, natural gas, and natural gas liquids; and refining and marketing, which include the refining of crude oil products, and the distribution and marketing of these and other purchased products, as well as a lubricants plant.

Valero Energy Corporation

Valero Energy is an international manufacturer and marketer of transportation fuels and petrochemical products. The company's segments include: Refining, which includes its refining operations, the associated marketing activities, and logistics assets that support its refining operations; Ethanol, which includes its ethanol operations, the associated marketing activities, and logistics assets that support its ethanol operations; and Renewable Diesel, which includes the operations of its joint ventture, Diamond Green Diesel Holdings LLC, which owns and operates a renewable diesel plant in Norco, LA.

Vertex Pharmaceuticals Incorporated

Vertex Pharmaceuticals is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and developing research and development programs in other indications. The company's marketed products are TRIKAFTA (elexacaftor/tezacaftor/ivacaftor and ivacaftor), SYMDEKO/SYMKEVI (tezacaftor in combination with ivacaftor), ORKAMBI (lumacaftor in combination with ivacaftor) and KALYDECO (ivacaftor), which are approved to treat patients with CF who have specific mutations in their cystic fibrosis transmembrane conductance regulator gene. The company is evaluating CTX001, a genetic therapy as a potential treatment for sickle cell disease and beta-thalassemia.

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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