Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.69 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

S&P 500 Near Support; Watching Energy For Strength

The market environment remains very mixed, with constant Sector rotations resulting in very few Sectors out- or under-performing for sustained periods. At the same time, market dynamics give us little-to-no reason to be bearish (aside from the simple fact that the S&P 500 has not pulled back even 5% for over 6 months). Growth Sectors (Communications, Technology) and large-caps (S&P 500) have been the primary winners and we recommend sticking with them until we see evidence of change. To that end, we are watching 1.38-1.45% on the 10-year Treasury yield; as long as the 10-year is below this level we expect to see growth and large-caps continue to outperform, however a break above 1.45% would likely signal a shift in favor of value and small-caps.

S&P 500. In our August 31 Compass we noted to expect some near-term consolidation in the S&P 500 after it hit our 4535 initial target. 4535-4545 remains short-term resistance, however as long as key support at the uptrend and 50-day MA (4428) holds, we expect to see 4585 followed by 4750. Should the 50-day MA break, it would likely kickstart a long-awaited a 5-15% pullback, and our next support levels to watch would be 4368, 4310, 4257, 4233, and 4164... see chart below.
Energy Improving. We got the first buy signal in Energy when WTI and Brent crude oil reclaimed $66 and $70, respectively, alongside support levels holding on the RYE, XLE, and XOP (8/31 Compass). And we are now getting further confirmation of the tide turning in favor of Energy, with bullish reversals in WTI and Brent crude oil and the Energy Sector (RYE) closing at the highest levels in two months -- add exposure. We view improvement within Energy as a bullish sign for the economy, however until we see sustained outperformance our market weight recommendation remains appropriate... see pages 2-3.
Big Picture Trends. High yield spreads have leveled-out, signaling little economic concerns. The US dollar remains below the key 93.50 level. Non-US equities display improvement (Japan breaking out, MSCI EAFE testing resistance). These are all bullish signs for US equities... see page 4.
Underlyings
Alliance Resource Partners L.P.

Alliance Resource Partners is a natural resource company. The company is a coal producer in the eastern United States. The company markets its coal production to main domestic and international utilities and industrial users. The company has two reportable segments: Illinois Basin, which comprises of multiple operating segments, including operating mining complexes Webster County Coal's Dotiki mining complex, Gibson County Coal's mining complex, River View's mining complex and the Hamilton mining complex; and Appalachia, which comprises of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex, the MC Mining mining complex and the Penn Ridge property.

Amundi ETF PEA MSCI EM Latin America UCITS ETF FCP

Arch Resources Inc. Class A

Arch Coal is a coal producer. The company's main business is the production of thermal and metallurgical coal from surface and underground mines located throughout the United Staets, for sale to utility, industrial and steel producers both in the United States and around the world. The company's segments are based on two lines of business, metallurgical coal and thermal coal, and may include a number of mine complexes. The company's segments are: the Powder River Basin, containing primary thermal operations in Wyoming; the Metallurgical, containing metallurgical operations in West Virginia; and the Other Thermal, containing supplementary thermal operations in Colorado and Illinois.

Atlas Corp.

Cameco Corporation

Cameco and its subsidiaries are engaged in the exploration for and the development, mining, refining, conversion and fabrication of uranium for sale as fuel for generating electricity in nuclear power reactors in Canada and other countries. Co. has three reportable segments: uranium, which explores for, mines, mills, purchases, and sells uranium concentrate; fuel services, which refines, converts and fabricates uranium concentrate, and purchases and sells conversion services; and electricity, which generates and sells electricity through its 31.6% interest in the Bruce Power Limited Partnership, which operates four nuclear reactors and manages the overall site in southern Ontario.

Centrus Energy Corporation

Centrus Energy is a supplier of nuclear fuel and services for the nuclear power industry. The company operates two business segments: low-enriched uranium (LEU), which supplies various components of nuclear fuel to utilities; and contract services, which provides engineering, design, and manufacturing services to government and private sector customers. The company's LEU business involves the sale of low-enriched uranium, its components, and natural uranium to utilities operating commercial nuclear power plants. LEU is a component in the production of nuclear fuel for reactors that produce electricity. The company supplies LEU to both domestic and international utilities for use in nuclear reactors.

Costamare Inc.

Costamare is an international owner of containerships. Co. is engaged in chartering vessels to many of the world's liner companies. As of Feb 23 2018, Co. has a fleet of 71 containerships with a total capacity in excess of 466,000 twenty foot equivalent units (TEUs). Co.'s strategy is to time charter its containerships to a geographically diverse, financially strong and loyal group of liner companies. Co.'s containerships operate primarily under multi-year charters and therefore are not subject to the effect of seasonal variations in demand. Some of Co.'s customers are A.P. Moller-Maersk, MSC, Evergreen, Hapag Lloyd and COSCO.

Denison Mines Corp.

Denison Mines is engaged in uranium mining and related activities, including the acquisition, exporation and development of uranium bearing properties and the extraction, processing and selling of uranium. The environmental services division of Co. provides mine decommissioning and decommissioned site monitoring services for third parties. Co. is also in the business of recycling uranium-bearing waste materials, referred to as "alternate feed materials", for the recovery of uranium, alone or in combination with other metals.

Eagle Bulk Shipping

Energy Fuels

Energy Fuels is engaged in uranium mining, milling, development, and exploration with operating uranium mines, mines on standby, development projects and exploration properties located in the United States. Co.'s assets include its 100% ownership of the White Mesa Mill in Utah. Co. also produces vanadium as a co-product from some of its mines in Colorado and Utah. In addition, Co. recycles uranium-bearing waste materials, referred to as "alternate feed materials", for the recovery of uranium, alone or in combination with other metals, at its White Mesa Mill.

Euroseas Ltd.

Genco Shipping & Trading Ltd.

Global Ship Lease Inc. Class A

Global Ship Lease is a holding company. Through its subsidiaries, the company is engaged in the business of owning and chartering out containerships under fixed rate charters to container liner companies.

Hallador Energy Co.

Hallador Energy is engaged in the production of steam coal from mines located in western Indiana. The company also owns a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana. Additionally, the company owns 100% of Hourglass Sands, LLC, a frac sand mining company in the State of Colorado.

Matson Inc.

Matson is a holding company engaged in the provision of ocean transportation and logistics services. The company's Ocean transportation segment business is conducted through Matson Navigation Company, Inc., which provides a lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia and operates an expedited service from China to Long Beach, CA, and provides services to Okinawa, Japan and various islands in the South Pacific. The company's Logistics business is conducted through Matson Logistics, Inc., an asset-light business that provides a variety of logistics services to its customers.

Navios Maritime Partners

Navios Maritime Partners L.P. is an international owner and operator of dry cargo and container vessels. The Company is engaged in the seaborne transportation services of a range of dry cargo commodities, including iron ore, coal, grain and fertilizer, and also containers, chartering its vessels under medium to long-term charters. It focuses on providing seaborne shipping services under long-term time charters. As of December 31, 2016, it controlled 12 Panamax vessels, nine Capesize vessels, three Ultra-Handymax vessels and seven container vessels. Panamax vessels are vessels capable of carrying a range of dry cargo commodities, including iron ore, coal, grain and fertilizer and being accommodated in various discharge ports. Capesize vessels are dedicated to the carriage of iron ore and coal. Ultra-Handymax vessels are similar to Panamax vessels although with less carrying capacity, and have self-loading and discharging gear on board to accommodate undeveloped ports.

Peabody Energy Corporation

Peabody Energy is a coal company, engaged in the mining of thermal coal for sale primarily to electric utilities and metallurgical coal for sale to industrial customers. The company owns interests in several coal mining operations located in the U.S. and Australia. The company has a majority interest in several of those mining operations and an equity interest in Middlemount Coal Pty Ltd. (Middlemount), which owns the Middlemount Mine in Queensland, Australia. In addition to its mining operations, the company markets and brokers coal from other coal producers, both as principal and agent, and trade coal and freight-related contracts through trading and business offices in the U.S., Australia, China, and the U.K.

Ramaco Resources

Ramaco Resources is a holding company. Through its subsidiaries, the company is an operator and developer of metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania. The company's near-term development portfolio includes four primary assets: Elk Creek, Berwind, RAM Mine and Knox Creek.

Safe Bulkers Inc.

Safe Bulkers is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for consumers of marine drybulk transportation services. As of Feb. 9, 2018, Co. had a fleet of 39 drybulk vessels, with an aggregate carrying capacity of 3,513,800 dwt and an average age of 7.6 years. Co. deploys its vessels on both period time charters and spot time charters. The vessels on period time charters provide Co. with relatively stable cash flow and utilization rates, while the vessels in the spot market allow Co. to maintain its flexibility in low charter market conditions.

SPDR S&P Oil & Gas Exploration ETF

Star Bulk Carriers Corp.

Star Bulk Carriers is an international company providing worldwide transportation solutions in the drybulk sector through its vessels-owning subsidiaries for a range of customers of major and minor bulk cargoes including iron ore, coal, grain, cement, fertilizer, along worldwide shipping routes. As of Dec 31 2016, Co. owned and operated a fleet of 73 vessels consisting primarily of Newcastlemax, Capesize as well as Kamsarmax, Ultramax and Supramax vessels with a carrying capacity between 52,055 dwt and 209,537 dwt. Co.'s vessels transport a range of major and minor bulk commodities, including ores, coal, grains and fertilizers, along worldwide shipping routes.

Yanzhou Coal Mining Co. Ltd. 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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