Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.59 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Failed Breakouts, Banks Crumbling -- Get Defensive

Despite a dramatic one-day reaction to Powell's speech on Wednesday (+3.15% on SPX), the S&P 500 finished the week with just a 1.1% gain. Moreover, not much has changed in terms of the charts as we look through all stocks in the Russell 3000 (something we do each week). In fact, there was some deterioration within banks (KRE, KBE), a trend that continued yesterday. Additionally, the S&P 500 has been unable to sustain a breakout above its 200-day MA and its YTD downtrend, the Russell 2000 (IWM) remains below $190 resistance, and the Dow Jones Industrials Average (DJIA) could not sustain a breakout above 34,280; as long as these indexes are below these levels, we continue to see this as a good time to shift to more defensive areas and/or take profits, and we continue to believe this 1.5-month rally is likely over.

Failed Breakouts. Not only does the DJIA show a failed breakout at 34,280, but so do several key Sectors we have been watching. These include Industrials (XLI) at $101, Financials (XLF) at $36, and potentially Materials (XLB) as well at $82 (still barely above). Failed breakouts are bearish patterns that could lead to another test of the YTD lows. This only reinforces our call to get more defensive and/or take profits... see page 4.
U.S. Dollar. The U.S. dollar (DXY) continues to have a strong negative correlation with equity market indexes, and it continues to be one of, if not the most important metrics we follow. The DXY is testing our critical support level now in the $103.70-$105 range; as long as it holds it would likely mean a pullback for the equity market, but a break below $103.70 would signal a major top in the DXY, and we would likely flip our equity market outlook to bullish... see page 5.
10-Year Treasury Yield. The 10-year yield just hit 3.5% support, which was our initial target following the uptrend break; if 3.5% fails to hold, 2.5-2.7% is the likely next stop. We believe there is a growing possibility that Treasuries will start being treated as a safe haven again... see page 5.
Defensives Leading? Defensive areas including several Consumer Staples stocks and Health Care (XLV) have led the market higher over the past week, a risk-off signal.
Underlyings
Anheuser-Busch InBev N.V. ADS

Boston Beer Company Inc. Class A

Boston Beer Company is an alcoholic beverage company and a craft brewer. The company is engaged in the business of selling alcohol beverages throughout the United States and in selected international markets. The company's brands include Samuel Adams?, Twisted Tea?, Truly Hard Seltzer?, Wild Leaf? Hard Tea and Tura? Alcoholic Kombucha. The company produces alcohol beverages including malt beverages, hard cider and hard seltzer at the company-owned breweries and its cidery and under contract arrangements at other brewery locations. The company sells its products mainly in the United States, but also has markets in Canada, Europe, Israel, Australia, New Zealand, the Caribbean, the Pacific Rim, Mexico, and Central and South America.

Coca-Cola Company

Coca-Cola is a nonalcoholic beverage company. The company owns or licenses and markets nonalcoholic beverage brands, which it groups into the following category clusters: sparkling soft drinks; water, enhanced water and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks. The company's nonalcoholic sparkling soft drink brands are Coca-Cola, Diet Coke, Fanta and Sprite. The company markets, manufactures and sells beverage concentrates and syrups, including fountain syrups; and finished sparkling soft drinks and other nonalcoholic beverages. The company's segments are Europe, Middle East and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments.

Compania Cervecerias Unidas S.A.

Conagra Brands Inc.

Conagra Brands is a packaged goods food company. The company's segments are: Grocery and Snacks, which includes branded, shelf stable food products sold in various retail channels; Refrigerated and Frozen, which includes branded, temperature controlled food products sold in various retail channels; International, which includes branded food products sold in retail and foodservice channels outside of the U.S.; Foodservice, which includes customized food products for sale to restaurants and other foodservice establishments; Pinnacle Foods, which includes and private-label food products; and Commercial Foods, which included commercially branded and private label food and ingredients, among others.

General Mills Inc.

General Mills manufactures and markets branded consumer foods. The company's segments are: North America Retail, which provides cereals, refrigerated yogurt, soup, meal kits, dessert and baking mixes, frozen pizza and pizza snacks, grain, fruit and savory snacks, and organic products, among others; Convenience Stores and Foodservice, which provides snacks, yogurt, frozen meals and frozen dough products, and baking mixes, among others; Europe and Australia, which includes retail and foodservice businesses in the Europe and Australia region; Asia and Latin America, which consists of retail and foodservice businesses in the Asia and South America regions; and Pets, which includes pet food products.

J.M. Smucker Company

Smucker (J.M.) manufactures and markets food and beverage products. The company's principal products are coffee, dog food, pet snacks, cat food, peanut butter, fruit spreads, frozen handheld products, shortening and oils, portion control products, juices and beverages, and flour and baking ingredients. The company has four reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods, and International and Away From Home. The U.S. retail market segments represent the sales of food and beverage products to consumers through retail outlets in North America. The International and Away From Home segment represents sales outside of the U.S. retail market segments.

Kraft Heinz Company

Kraft Heinz is a food and beverage company. The company manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world. The company has three reportable segments defined by geographic region: United States, Canada, and Europe, Middle East, and Africa. The company's remaining businesses are combined and disclosed as Rest of World. Rest of World comprises two operating segments: Latin America and Asia Pacific.

Mondelez International Inc. Class A

Mondelez International sells food and beverage products. The company makes and sells primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum and candy, as well as various cheese and grocery and powdered beverage products. The company's portfolio includes snack brands such as Cadbury, Milka and Toblerone chocolate; Oreo, belVita and LU biscuits; Halls candy; Trident gum and Tang powdered beverages. The company's operations and management structure are organized into four operating segments: Latin America; Asia, Middle East and Africa; Europe; and North America. The company sells its products to supermarket chains, wholesalers, supercenters, value stores and other retail food outlets.

Monster Beverage Corporation

Monster Beverage is a holding company. Through its subsidiaries, the company develops, markets, sells and distributes energy drink beverages and concentrates for energy drink beverages. The company has the following operating and reportable segments: Monster Energy? Drinks segment, which is primarily comprised of the company's Monster Energy? drinks and Reign Total Body Fuel? energy drinks; Strategic Brands segment, which is comprised primarily of the various energy drink brands from The Coca-Cola Company, as well as its energy drinks; and Other segment, which is comprised of certain prod ucts sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary, to independent third-party customers.

PepsiCo Inc.

PepsiCo is a food and beverage company. The company's segments include: Frito-Lay North America, which includes food and snack businesses in the United States and Canada; Quaker Foods North America, which includes cereal, rice, pasta and other food businesses in the United States and Canada; PepsiCo Beverages North America, which includes beverage businesses in the United States and Canada; Latin America, which includes beverage, food and snack businesses in Latin America; Europe, which includes beverage, food and snack businesses in Europe; and Africa, Middle East and South Asia, which includes beverage, food and snack businesses in Africa, the Middle East and South Asia.

Unilever PLC ADS

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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