Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.65 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Expecting Russell 2000 (IWM) Breakout Above $199

We continue to believe the path of least resistance is higher for the major equity indexes, which has been our stance since our 5/30/23 ETF Pathfinder. We also remain bullish on the S&P 500, and we expect to see support at its 50-day MA moving forward. Beginning with our 7/18/23 Compass, we discussed our expectation for major 1+ year breakouts on the equal-weighted S&P 500 (RSP), Dow, and Russell 2000 (IWM). The breakouts happened later that day on the RSP and Dow (above $153 and 34,280, respectively), and the IWM is now on the cusp of breaking out above $199. With market dynamics largely bullish, we expect the market to continue rewarding risk-seeking behavior.

Many Reasons to Be Bullish. (1) Breadth across all major broad market indexes continues to improve. (2) The U.S. dollar (DXY) remains in an 8-month downtrend. (3) The 10-year Treasury yield is below 4.1% resistance. (4) High yield spreads are at 1+ year narrows. (5) Defensive Sectors including Consumer Staples (XLP), Utilities (XLU), and Health Care (XLV) remain in multi-month RS downtrends. (6) Banks (KRE, KBE) appear to have bottomed, though are possibly running into resistance alongside Financials (XLF). (7) RS for small-caps appears to be bottoming as it holds above 3.5-year RS support. (8) Non-U.S. equities remain bullish from a price perspective, with recent major breakouts from Europe's EURO STOXX 50, MSCI EM (EEM), MSCI ACWI ex-U.S. (ACWX), and MSCI EAFE (EFA)... see pages 3-5.
When to Expect a Pullback? In terms of what could lead to a pullback, we are watching 4.1% resistance on the 10-year Treasury yield and the 8-month downtrend on the U.S. dollar (DXY); breakouts would likely be problematic for the equity market. Value Sectors such as Industrials, Energy, Transportation, Materials, and Financials have outperformed relative to growth Sectors so far in 3Q2023, and that would likely continue if rates and Treasury yields break higher.
Commodities. The Bloomberg Commodity index (DJP) and WTI crude oil remain bullish, and base metals (DBB) are bottoming. Gold and silver prices remain constructive as well. This should continue to support the Energy and Materials Sectors.
Underlyings
Archrock Inc.

Archrock is an energy infrastructure company with a pure-play focus on midstream natural gas compression. The company is the provider of natural gas compression services to customers in the oil and natural gas industry and a supplier of aftermarket services to customers that own compression equipment. The company has two primary business segments: Contract Operations, which provides contract operations services, including the personnel, equipment, tools, materials and supplies to meet its customers' natural gas compression needs; and Aftermarket Services, which sells parts and components and provides operation, maintenance, overhaul and reconfiguration services to customers who own compression equipment.

Baker Hughes Company Class A

Baker Hughes is an energy technology company. The company's segments are: Oilfield Services, which provides products and services for onshore and offshore operations ranging from drilling, evaluation, completion, production, and intervention; Oilfield Equipment, which provides products and services for the subsea, offshore surface and onshore operating environments; Turbomachinery and Processing Solutions, which provides equipment and related services for mechanical-drive, compression and power-generation applications; and Digital Solutions, which includes condition monitoring, industrial controls, non-destructive technologies, measurement, sensing, and pipeline solutions.

ChampionX Corporation

Chart Industries Inc.

Chart Industries is a manufacturer of equipment servicing multiple market applications in energy and industrial gas. The company's product portfolio is used throughout the liquid gas supply chain in the production, storage, distribution and end-use of atmospheric, hydrocarbon, and industrial gases. The company's equipment and systems are primarily used to cool gases often to cryogenic liquid temperatures and then to transport and store them as liquids. The company's products include vacuum insulated containment vessels, heat exchangers, cold boxes, liquefaction process units, other cryogenic components, gas processing equipment, ambient temperature fans and after market services.

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.

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.

Frank's International NV

Halliburton Company

Halliburton assists its customers throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion and optimizing production throughout the life of the asset. The company's segments are: Completion and Production, which delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion products and services; and Drilling and Evaluation, which provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities.

Helix Energy Solutions Group Inc.

Helix Energy Solutions Group is an international offshore energy services company that provides specialty services to the offshore energy industry. The company has three business segments: well intervention, which includes vessels and equipment used to perform well intervention services primarily in the U.S. Gulf of Mexico, Brazil, the North Sea and West Africa; robotics, which includes remotely operated vehicles (ROVs), trenchers and ROVDrills designed to complement offshore construction and well intervention services; and production facilities, which includes the Helix Producer I, a floating production vessel, the Helix Fast Response System, and its ownership interest in Independence Hub, LLC.

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.

NexTier Oilfield Solutions Inc.

NexTier Oilfield Solutions is a holding company. Through its subsidiaries, the company is engaged as a land oilfield focused service company, with a set of well completion and production services across active basins. The company provides its services through its operating subsidiaries to exploration and production customers. Also, the company provides its services in several active basins in the United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford and the Bakken/Rockies. The company is organized into two segments: Completion Services, which includes Hydraulic Fracturing and Wireline Technologies; and Well Construction and Intervention Services, which includes Cementing and Coiled Tubing.

NOV Inc.

Oceaneering International Inc.

Oceaneering International is a provider of engineered services and products, primarily to the offshore oil and gas industry. The company's segments are: Energy Services and Products; and Advanced Technologies. The company's business segments within the Energy Services and Products business are remotely operated vehicles, subsea products, subsea projects and asset integrity. The company's Advanced Technologies segment consists of government; and commercial business units: Government services and products include engineering and related manufacturing in defense and space exploration activities. The company's commercial business unit provides a turnkey solution that includes program management, and engineering design.

Oil States International Inc.

Oil States International, through its subsidiaries, is an oilfield products and services company serving the drilling, completion, subsea, production and infrastructure sectors of the oil and gas industry. The company is also a provider of completion services to the industry. The company operates through three segments: well site services, whose operations primarily include completion-focused equipment and services as well as land drilling services; downhole technologies, which provides oil and gas perforation systems and downhole tools; and offshore/manufactured products, which designs, manufactures and markets capital equipment utilized on floating production systems, among others.

Pioneer Natural Resources Company

Pioneer Natural Resources is a holding company. Through its subsidiaries, the company is engaged in oil and gas exploration and production. The company explores for, develops and produces oil, Natural Gas Liquids and gas within the United States, with operations in the Permian Basin in West Texas. The company's portfolio of resources are located in the Spraberry/Wolfcamp oil field.

ProPetro Holding Corp.

ProPetro Holding is a holding company. Through its subsidiary, the company is engaged as an oilfield services company providing hydraulic fracturing and other services to upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. The company's operations are primarily focused in the Permian Basin. In addition to its core hydraulic fracturing operations, the company provides complementary well completion and production services, including cementing, coiled tubing, flowback services and drilling. The company conducts its business through five segments: hydraulic fracturing (inclusive of acidizing), cementing, coil tubing, flowback and drilling.

Schlumberger NV

Schlumberger provides technology for reservoir characterization, drilling, production and processing to the oil and gas industry. The company has four segments: Reservoir Characterization, which consists of the principal technologies involved in finding and defining hydrocarbon resources; Drilling, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells; Production, which consists of the principal technologies involved in the lifetime production of oil and gas reservoirs; and Cameron, which consists of the principal technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.

Subsea 7 S.A. ADS

TechnipFMC Plc

TechnipFMC is global leader in oil and gas projects, technologies, systems, and services. Co. offers subsea, surface, onshore, and offshore solutions for oil and gas projects. Co. serves customers worldwide. With Co.'s technologies and production systems, integrated expertise, and comprehensive solutions, Co. is transforming Co.'s clients' project economics. Co. is uniquely positioned to deliver greater efficiency across project lifecycles from concept to project delivery and beyond. Through innovative technologies and improved efficiencies, Co.'s offering unlocks new possibilities for Co.'s clients in developing their oil and gas resources.

Tidewater Inc

Tidewater provides offshore marine support and transportation services to the global offshore energy industry through the operation of a fleet of marine service vessels. The company's vessels and associated vessel services provide support of several phases of offshore oil and natural gas exploration, field development and production. These services include towing of, and anchor handling for, mobile offshore drilling units; transporting supplies and personnel necessary to sustain drilling, workover and production activities; offshore construction and seismic and subsea support; and a variety of services such as pipe and cable laying.

Weatherford International Plc

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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