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

Vermilion Compass: Weekly Equity Strategy

SPX 4165-4200 in Play; Breadth Improving

In our 3/21/23 Compass we discussed the potential for a 2-5% rally to the 1.5-month downtrend on the S&P 500, or even the 4165-4200 range, which we noted would set up an opportunity to get more defensive. The S&P 500 has gained 4.5% since, but has reversed topside the downtrend, putting a test of 4165-4200 in play. We still believe 4165-4200 will cap upside in 2023 -- with a reach to 4300-4325 also possible -- but considering limited upside, we recommend shifting toward defensives. Downside targets continue to be at the December 2022 lows (3765) and/or the 2022 lows (3490).

Index Overview. The S&P 500 and Dow Jones Industrial Average (DJIA) reversed their 1.5-month downtrends last Wednesday, with the DJIA also breaking above 32,500, leading to this latest rally. We still expect 34,280 to cap upside on the DJIA, a level we have discussed since mid-November 2022. The Nasdaq 100 (QQQ) broke above $315 resistance; the next resistance level we are watching is $335 (Aug. 2022 highs)... see below.
Breadth Improving; Watching Financials/Banks. In our 2/28/23 and 3/7/23 Compass reports we discussed breadth deterioration in the S&P 500 and Russell 2000, which ultimately led to 5% and 11% pullbacks, respectively. Now we are starting to see breadth improvement with the Dow Jones Industrial Average and NYSE Composite showing bullish divergences -- their price broke below their December 2022 lows, but their advance/decline lines made higher lows. Breadth improvement is encouraging and a welcomed sight, but Financials (XLF) and banks (KRE, KBE) remain largely broken. We believe it will take time (likely months) for Financials/banks to bottom, and until they do, upside is likely to be capped on the broad market... see pages 3-4.
Big Picture Trends. High yield spreads are near 1-month lows. The TED spread (a proxy for credit risk and risk of bank defaults) is hovering near 1-year highs. The Bloomberg Commodity index (DJP) is back to test $32 resistance while WTI crude oil is similarly testing resistance at $82. The 10-year Treasury yield is again testing support at 3.35%-3.4%. The U.S. dollar (DXY) is consolidating between support at $101.25 and resistance at $105.50, and we believe an eventual break below $101.25 is likely... see pages 5-7.
Underlyings
AngloGold Ashanti Ltd. ADS

Belo Sun Mining Corp.

Belo Sun Mining is a development stage company engaged in the acquisition and exploration of gold properties as well as mining and exploring for minerals. The recoverability of the carrying value of interests in mineral properties and Co.'s continued existence is dependent upon the preservation of its interests in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or the ability of Co. to raise additional financing, if necessary, or alternatively upon Co.'s ability to dispose of its interests on an advantageous basis.

Clean Harbors Inc.

Clean Harbors is a provider of environmental, energy and industrial services throughout North America. The company collects, transports, treats and disposes of hazardous and non-hazardous waste, including resource recovery, physical treatment, fuel blending, incineration, landfill disposal, wastewater treatment, lab chemical disposal, explosives management and CleanPack? services. The company's Safety-Kleen business provides an array of environmental services and complementary products to a range of customers including automobile repair shops, car and truck dealers, metal fabricators, machine manufacturers, fleet maintenance shops and other automotive, industrial and retail customers.

DRDGOLD Ltd. ADS

Eldorado Gold Corp.

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 Corp.

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.

Evoqua Water Technologies Corp

Evoqua Water Technologies is a holding company. Through its subsidiaries, the company is engaged in providing water treatment solutions, providing services, systems and technologies to support its customers' water lifecycle needs. The company provides a portfolio of differentiated, proprietary technology solutions sold under a number of market and brands. The company serves its customers through two segments: Integrated Solutions and Services, which provides application-specific solutions and lifecycle services for critical water applications; and Applied Product Technologies, which sells differentiated technologies to a set of water treatment system specifiers, integrators and end users globally.

Galiano Gold Inc

Asanko Gold is a natural resource company engaged in the acquisition and exploration of mineral resources in West Ghana. The recoverability of amounts shown for resource properties and deferred exploration costs and Co.'s ability to continue as a going concern is dependent upon the discovery of economically recoverable reserves, continuation of Co.'s interest in the underlying resource claims, the ability of Co. to obtain necessary financing to complete their development and upon future profitable production or proceeds from the disposition thereof.

Gibson Energy Inc.

Gibson Energy is engaged in the movement, storage, blending, processing and marketing and distribution of crude oil, condensate, natural gas liquids and refined products. Co. operates five business segments: Terminals and Pipelines, Truck Transportation, Propane and NGL Marketing and Distribution, Processing and Wellsite Fluids, and Marketing.

Harmony Gold Mining Co Ltd (ADR)

HSIL

HSIL Limited is an India-based company, which offers sanitaryware, faucets and glass bottles. The Company's segments include Building products division and Packaging products division. The Building products division's products include sanitaryware, such as Water closets, Wash basins, Pedestals, Squatting pans, Urinals, Cisterns and Bidets; wellness, such as Bath tubs, Shower panels, Shower enclosures and Whirlpools; faucets/showers, such as Showers, Bathroom faucets and Kitchen faucets; Allied products, such as Seat covers and Concealed cisterns, and consumer products, such as Kitchen Appliances (Vents, Chimneys, Waste Crusher System, Hobs and Cooktops), Water Heaters/Geysers, Air Purifier and Kitchen Sink. The Packaging products division's products include Glass Containers, polyethylene terephthalate (PET) Bottles, Security Caps and Closures. The Company's brands include QUEO, Amore, hindware Italian Collection/hindware Art, Benelave, Raasi, moonbow, EVOK, AGI and Garden Polymers.

IAMGOLD Corporation

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

MCEWEN MINING INC.

Merit Medical Systems Inc.

Merit Medical Systems manufactures and markets proprietary disposable medical devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy. The company conducts its business through two segments: Cardiovascular, which includes its Peripheral Intervention, Cardiac Intervention, Cardiovascular and Critical Care, Interventional Oncology and Spine and Breast Cancer Localization and Guidance product groups; and Endoscopy, which provides non-vascular stents to treat gastrointestinal and pulmonary disease including AERO?, AEROmini? and AERO DV? Fully Covered Tracheobronchial Stents and Alimaxx-B? Biliary Stent Systems.

Panoro Energy ASA

Panoro Energy is an international independent oil and gas company engaged in the exploration and production of oil and gas resources in Brazil and West Africa. In Brazil, Co. participates in a number of oil and gas licenses located in the Santos basin outside the south-east coast of Brazil and in the Camamu-Almada basin in the state of Bahia. In West Africa, Co. participates in a number of licences in Nigeria and Gabon. As of Dec 31 2013, Co.'s commercial production is from the Manati field in Brazil.

Perma-Fix Environmental Services Inc.

Perma-Fix Environmental Services, through its subsidiaries, is an environmental and environmental technology company. The company has three segments: Treatment, which includes nuclear, low-level radioactive, mixed waste, hazardous and non-hazardous waste treatment, processing and disposal services, as well as research and development activities to identify, develop and implement waste processing techniques for problematic waste streams; Services, which includes on-site waste management services to commercial and governmental customers, and an equipment calibration and maintenance laboratory; and Medical, which includes research and development of the company's medical isotope production technology.

TERMINAL X ONLINE LTD.

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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