Vermilion Compass: Weekly Equity Strategy
Russell 2000 (IWM) Testing $170; Energy DowngradeOur 2023 outlook remains unchanged; we see the market indexes as consolidating within broad horizontal trading ranges, and we expect the top-end of the range to be 4165-4200 on the S&P 500, with the bottom-end at the 2022 lows (3490). Another possible support level we are monitoring is at the December 2022 lows (3765). Shorter-term, bears are in control as long as the 1.5-month downtrend remains intact on the S&P 500, but we are watching short-term support at 3900; if 3900 holds we could see a 2-5% rally to the aforementioned downtrend or even the 4165-4200 range, which we believe would set up an opportunity to get more defensive. The Russell 2000 (IWM) is testing important support at $170 (the Dec. 2022 lows and the prior downtrend from 2022), suggesting this is a logical time for an oversold bounce.
Downgrading Energy to Underweight. We are downgrading Energy to underweight -- reduce exposure. The Energy Sector ETFs (XLE and RYE) are breaking below their 200-day MAs and also violating their 2.5-year uptrends as WTI crude oil displays a major 2-year uptrend breakdown below $72-73... see page 3.
WTI Crude Oil, Bloomberg Commodity Index, Gold & Silver, 10-Year Treasury Yield. The weakness in crude oil has led to a cyclical top in broad commodities, with the Bloomberg Commodity index (DJP) breaking below $32. Gold and silver (GLD, SLV) display short-term improvement, but could be vulnerable if the 10-year Treasury yield holds above 3.4% support as we await Wednesday's FOMC announcement... see pages 3-5.
U.S. Dollar (DXY). As long as the DXY is below $105.50 we could see some short-term upside in the equity indexes, especially if this short-term breakdown below $103.50 holds... see page 5.
Growth vs. Value. Growth has dominated leadership thus far in 2023, but we expect a more level playing field as the market tries to move past the "banking crisis." Also, large-cap Technology (XLK) is approaching RS resistance from 2021... see page 6.
Axos Financial is a financial holding company for Axos Bank (the Bank), that provides banking and securities products and services to its customers through its online and distribution channels and affinity partners. The Bank has deposit and loan customers nationwide including consumer and business checking, savings and time deposit accounts and financing for single family and multifamily residential properties, small-to-medium size businesses in target sectors, and selected specialty finance receivables. The company distributes its deposit products through a range of retail distribution channels, and its deposits consist of demand, savings and time deposits accounts.
Barrick Gold is engaged in the production and sale of gold, as well as related activities such as exploration and mine development. Co. also produces copper and hold interests in oil and gas properties located in Canada. Co.'s mining operations are concentrated in three regional business units: North America, South America and Australia Pacific. Co. also hold a 73.9% equity interest in African Barrick Gold plc that owns gold mines and exploration properties in Africa. Co.'s copper business unit contains producing copper mines located in Chile and Zambia; and a mine under construction located in Saudi Arabia.
Cavco Industries designs and produces factory-built homes distributed through a network of independent and the company-owned retailers, planned community operators and residential developers, marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Lexington. The company is also a producer of park model RVs, vacation cabins and systems-built commercial structures, as well as modular homes built under the Nationwide Homes brand. Each home contains a living room, dining area, kitchen, one to five bedrooms and one or more bathrooms, is equipped with central heat and hot water systems, kitchen appliances, floor coverings and window treatments.
IAMGold is engaged in the exploration for, development and operation of gold mining properties, and the operation of a niobium mine.
Kinross Gold is engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. As of Dec 31 2013, Co.'s proven mineral reserves for gold and silver were 1,122 ounces and 1,179 ounces respectively.7,883 7,883 7,883
Legacy Housing builds, sells and finances homes and tiny houses that are distributed through a network of independent retailers and the company-owned stores and also sold directly to manufactured home communities. The company's operations are focused in the southern United States. The company provides floor plan financing for its independent retailers, which takes the form of a consignment arrangement between the retailer and the company The company also provides consumer financing for its products which are sold to end-users through both independent and the company-owned retail locations, and the company provides financing solutions to manufactured housing community owners that buy the company's products for use in their housing communities.
Skyline Champion is a producer of factory-built housing in the United States and Canada. The company serves as a solution provider across complementary and vertically integrated businesses including manufactured construction, company-owned retail locations, and transportation logistics services. The company produces a range of manufactured and modular homes under a variety of brand names and in a variety of floor plans and price ranges. While most of the homes the company builds are single-family, multi-section, ranch-style homes, it also builds two-story, single-section, and Cape Cod style homes as well as multi-family units such as town homes, apartments, duplexes, and triplexes.
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.
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