Vermilion Compass: Weekly Equity Strategy
Consumer Discretionary Sector Continues to Develop PositivelyWe discussed last week (7/03/23 ETF Pathfinder) our upgrade of the Consumer Discretionary Sector. One of the areas that have failed to reflect a potential bottom appears to be perking up and has broken to multi-month highs. XRT The S&P 500 Retail ETF has broken out of a bullish base and reversed a 4-month downtrend vs the S&P 500. see chart below.
Russell 2000 (IWM), Dow, Equal-Weighted S&P 500 (RSP). The Russell 2000 (IWM), Dow, and equal-weighted S&P 500 (RSP) were all unable to break above resistance levels discussed in recent weeks, including $190, 34,280, and $153/$150, respectively. It is hard for us to call this a bull market if these indexes remain below these important levels. However, markets often need to consolidate and pause and Moreover, the IWM is back to test support at $180; we would expect to see hold as support, but if $180 fails to hold we expect a trip back to $170... see chart below.
Financials/Banks. Financials (XLF) has broken above the is above the 3.5-month resistance at $33.50 and the 200-day MA, and banks appear to be breaking above key levels including $41.50 on the KRE and $35.50 on the KBE. The XLF is constructive as it remains above critical support at $30.50. Banks appear to be developing a potential H&S bottom. This would certainly be bullish for the markets and provide a catalyst for potential further market gains. ... see page 3.
Technology, Industrials, Energy. Technology (XLK) has predictably pulled back after testing its 2021 highs at $177. Equal-weighted Technology (RSPT) is back to test 1+year base support near $280 -- a logical place to expect a bounce. Industrials (XLI) are holding above base support at $103. Energy (OIH), (RIG) is attempting a reversal. Service related companies are leading.... see page 4 and page 6.
Big Picture Trends. Breadth remains constructive on the SPX and Russell 2000. ... see pages 5-7.
In today's report we highlight attractive Groups and stocks within Energy and Transportation: EN-14 Oil & Gas Services, Large-Cap, EN-15 Oil & Gas Services, Small-Cap, TR-01 Airlines, Major, and TR-02 Airlines, Regional/Low Cost... see pages 8-23.
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.
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.
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.
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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