Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.72 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Year-End Rally to Continue?

The broad equity market has been on an absolute tear since we discussed in our 10/31/23 Compass how risk/reward favored buyers as key supports were being tested, including 4165 on the S&P 500, $162-$163 on the Russell 2000 (IWM), and $350 on the Nasdaq 100 (QQQ). Furthermore, we discussed in our 11/7/23 Compass our belief that this was more than just another counter-trend rally, and that it is likely the start of a significant year-end rally. We also reiterated our bullish views in last week's U.S. Macro Vision (11/14/23). Bullish developments have only continued; among them includes 3.5-month downtrend reversals on the S&P 500 and QQQ. Though it is far from a guarantee considering "breakaway" gaps and what appears to be an ongoing "lockout rally," we would not be surprised to see a minor pullback of 2-5%, particularly with the SPX approaching resistance at 4600-4607. If that were to happen (big IF), we would use it as a buying opportunity. We expect more upside into year-end and beyond.

Bullish Market Dynamics. Many market dynamics support our bullish outlook, including (1) the U.S. dollar (DXY) displays a false breakout at the important $105.70-$106 level, (2) Treasury yields across the curve display multi-month uptrend violations, (3) high yield spreads are at 18-month narrows, (4) defensive Sectors including Consumer Staples (XLP) and Utilities (XLU) remain in YTD RS downtrends, and (5) breadth continues to bottom-out. Combine these major risk-on signals with 3.5-month downtrend reversals on the SPX and QQQ, and we have every reason to expect this explosive rally to continue... see page 3.
Additional Bullish Trends. Every single index/Sector that we discussed as buys following their bullish 2+ month downtrend reversals in our 11/7/23 Compass have continued to advance, including MSCI ACWI (ACWI), MSCI ACWI ex-U.S. (ACWX), MSCI EM (EEM), MSCI EAFE (EFA), Technology (XLK), ARK Innovation (ARKK), Renaissance IPO (IPO), retail (XRT), banks (KRE, KBE), homebuilders (ITB), and Dow Internet (FDN). We also added the Nasdaq 100 (QQQ), DJI, and semiconductors (SMH) to that buy list in in last week's U.S. Macro Vision (11/14/23). Continue to ride these trends higher... see page 5.
Reiterating 11/14/23 Sector Weighting Changes. As a reminder, we recently upgraded cap-weighted Technology (XLK) and Communications (XLC) to overweight, and we downgraded both Health Care (XLV, RSPH) and Transportation (IYT, XTN) to underweight.
Underlyings
Abercrombie & Fitch Co. Class A

Abercrombie & Fitch, through its subsidiaries, is a retailer which primarily sells its products through its wholly-owned store and direct-to-consumer channels, as well as through various third-party wholesale, franchise and licensing arrangements. The company provides an assortment of apparel, personal care products and accessories for men, women and children under the Hollister, Abercrombie & Fitch and abercrombie kids brands. The company has operations in North America, Europe, Asia and the Middle East. The company's operating segments are brand-based: Hollister and Abercrombie, the latter of which includes the company's Abercrombie & Fitch and abercrombie kids brands.

Adtalem Global Education Inc.

Adtalem Global Education provides educational services. The company's institutions and companies provide an array of programs across medical and healthcare, financial services and business and law. The company's segments include: Medical and Healthcare, which includes Chamberlain University and Medical and Veterinary Schools that provide educational programs in nursing and health professions, respectively; Financial Services, which includes Becker Professional Education that provides education serving the accounting and finance professions; and Business and Law, which includes Adtalem Education of Brazil institution that focuses in business, engineering, healthcare, law, management, medical and technology.

Alps Alpine

American Eagle Outfitters Inc.

American Eagle Outfitters is a multi-brand retailer. The company operates retail stores and online at www.ae.com and www.aerie.com. The company provides a range of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. The company operates stores in the U.S., Canada, Mexico, Hong Kong, and China. The company also has license agreements with third-parties to operate American Eagle Outfitters and Aerie stores throughout Asia, Europe, India, Latin America and the Middle East. The company also operates two other brands, Tailgate, a vintage, sports-inspired apparel brand, and Todd Snyder New York, a menswear brand.

Atara Biotherapeutics Inc

Atara Biotherapeutics is an off-the-shelf, allogeneic T-cell immunotherapy company that is developing treatments for patients with cancer, autoimmune and viral diseases. The company's primary T-cell immunotherapy, tab-cel? (tabelecleucel), is in development for patients with Epstein-Barr virus (EBV) associated post-transplant lymphoproliferative disease who have failed rituximab or rituximab plus chemotherapy, and other EBV-associated hematologic malignancies and solid tumors. The company's T-cell immunotherapies in clinical development include ATA188: T-cell immunotherapies targeting EBV antigens for the treatment of multiple sclerosis; and ATA2271/ATA3271: CAR T immunotherapy targeting mesothelin.

Brookdale Senior Living Inc.

Brookdale Senior Living is a holding company. Through its subsidiaries, the company is an operator of senior living communities. The company's Community offerings include: independent living, which is for middle to upper income seniors; assisted living and memory care, which provides housing and assistance to mid-acuity frail and elderly residents; and continuing care retirement, which provides living arrangements and services to accommodate various physical ability and health. Through its Health Care Services segment the company provides home health, hospice and outpatient therapy services, and education and wellness programs, to residents of its communities and to seniors living outside of its communities.

Buckle Inc.

The Buckle is a retailer of casual apparel, footwear, and accessories for young men and women. The company markets a selection of mainly brand name casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear. The company provides denims from brands such as Miss Me, Rock Revival, KanCan, Flying Monkey, and Levi's. The company also incorporates services such as hemming, gift wrapping, layaways, a guest loyalty program, the Buckle private label credit card, personalized stylist services, and an order system that allows stores to obtain specifically requested merchandise from other the company stores or from the company's online order fulfillment center.

DUOLINGO INC

Ensign Group Inc.

Ensign Group is a holding company. Through its operating subsidiaries, the company provides skilled nursing, senior living and rehabilitative services, as well as other ancillary businesses. In transitional and skilled services, the company provides short and long-term nursing care services for patients with chronic conditions, prolonged illness, and the elderly. The company's senior living companies provide residential accommodations, activities, meals, housekeeping and assistance in the activities of daily living to seniors who are independent or who require some support, but not the level of nursing care provided in a skilled nursing operation. The company's other business lines includes of mobile ancillary services.

Gap Inc.

The Gap is an apparel retail company. The company provides apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, and Hill City brands. The company has stores in the U.S., Canada, the U.K., France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico, and has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, and Banana Republic stores throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate stores that sell apparel and related products under the company's brand names.

Grand Canyon Education Inc.

Grand Canyon Education is an educational services company focused on providing support services to institutions in the post-secondary education sector. The company's services include: Technical and Academic Services, which provides services that relate to the ongoing maintenance of its client's educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems; Counseling Services and Support, which includes team-based counseling and other support for prospective and existing students of its client as well as financial aid processing; Marketing and Communication; and Back Office Services.

Lincoln Educational Services

Lincoln Educational Services provides post-secondary education to high school graduates and working adults. The company provides programs in automotive technology, skilled trades, which include heating, ventilating and air conditioning, welding and computerized numerical control and electronic systems technology, among other programs; healthcare services, which include nursing, dental assistant, medical administrative assistant, among other programs; hospitality services, which include culinary, therapeutic massage, cosmetology and aesthetics; and information technology, which consists of information technology programs.

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

NHC Communications, Inc.

Perdoceo Education Corp

Career Education's academic institutions provide education to students in a variety of disciplines through online, campus-based and blended learning programs. The company's reporting segments are: Colorado Technical University, which provides industry-relevant degree programs and academic programs in the career-oriented disciplines of business studies, nursing, computer science, engineering, information systems and technology, cybersecurity and healthcare management; and American InterContinental University, which helps personnel get the degree and provides academic programs in the career-oriented disciplines of business studies, information technologies, education and criminal justice.

Stride Inc

Tillys

Tilly's is a retailer of casual apparel, footwear and accessories for young men, young women, boys and girls. The company's stores are located in malls, lifestyle centers, power centers, community centers, outlet centers and street-front locations. Customers may also shop online, where the company features the same assortment of product as is carried in its stores, supplemented by additional online-only styles. The company provides a mix of merchandise for young men, young women, boys and girls across the apparel, footwear and accessories categories. The company's apparel merchandise includes branded, fashion, and core styles for tops, outerwear, bottoms, and dresses.

Universal Technical Institute Inc.

Universal Technical Institute is a provider of postsecondary education for students seeking careers as automotive, diesel, collision repair, motorcycle and marine technicians as well as welders and computer numeric control machining technicians. The company provides certificate, diploma or degree programs under the banner of several brands, including Universal Technical Institute, Motorcycle Mechanics Institute and Marine Mechanics Institute and NASCAR Technical Institute. Additionally, the company provides manufacturer specific advanced training (MSAT) programs, including student-paid electives, at its campuses and manufacturer or dealer sponsored training at certain campuses and training centers.

Vera Bradley Inc.

Vera Bradley is a designer of women's handbags, luggage and travel items, fashion and home accessories, and gifts. The company sells its products through two reportable segments: Direct and Indirect. The Direct business consists of sales of Vera Bradley products through the company's full-line and factory outlet stores, verabradley.com, the company's online outlet site, direct-to-consumer eBay sales, and the company's annual outlet sale in Fort Wayne, IN. The Indirect business consists of sales of Vera Bradley products to specialty retail locations, as well as department stores, national accounts, third party e-commerce sites, third-party inventory liquidators, and sales generated through licensing agreements.

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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