Report
Dave Nicoski ...
  • Ross LaDuke
EUR 47.02 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Russell 2000 (IWM) Testing $180 Resistance

Since January 2023 we have discussed how we anticipate 4165-4200 to cap upside on the S&P 500 for 2023, but that a rally to 4300-4325 is also possible; this remains our view. So far there has not been much traction above 4200. An obvious problem continues to be weak breadth, but as we have discussed since our May 9th U.S. Macro Vision, this does not have to end badly. There is a possibility that large-caps (AAPL, META, MSFT, GOOGL, NVDA, etc.) could pause or see slight outflows, which could allow for capital to be disbursed to other areas, thereby providing a catalyst for breadth to expand. To that end, we are watching the Russell 2000 (IWM) which is testing 2.5-month resistance at $180; a break above resistance would signal improving breadth and would be a positive development... see chart below.

S&P 500. Resistance at 4200 remains the gateway to 4300-4325 while support at 4050 is the gateway to a more meaningful pullback. Downside targets continue to be the December 2022 lows at 3765 and/or the 2022 lows at 3490.
Big Picture Trends. Russell Micro Caps (IWC) appear to be breaking above short-term resistance at $105.50, a potential sign that the IWM is poised to break out as well. Cap-weighted Technology (XLK) and Communications (XLC) display price and RS breakouts, being led by a handful of large-caps. Defensives (Utilities, Staples, gold, gold miners, large-cap pharma) are starting to display RS deterioration. Retail (XRT) is hitting 3-year RS lows. Growth-dominant ETFs such as IPO, ARKK, and ARKG show signs of bottoming... see pages 3-5.
10- and 30-Year Treasury Yields; U.S. Dollar (DXY). The 10-year Treasury yield broke above 3.63% short-term resistance and is likely to test longer-term resistance at 3.9%-4.0%. The 30-year Treasury yield similarly broke above 3.83% short-term resistance and is currently testing longer-term resistance at 4.0%. Additionally, the U.S. dollar (DXY) has climbed over the past two weeks to test the midpoint ($103.50) of the 6-month consolidation between support at $101 and resistance at $105.50. If these all continue to rise, it is only a matter of time before they become a problem again.
In today's report we highlight attractive Groups and stocks within Fina
Underlyings
Banco Bradesco S.A. ADS,

Banco de Chile ADS

Banco Latinoamericano de Comercio Exterior S.A. Class E

Banco Macro SA Sponsored ADR Class B

Banco Santander Brazil S.A. ADS

Banco Santander-Chile ADS

Cintas Corporation

Cintas is a provider of corporate identity uniforms through rental and sales programs, as well as a provider of related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, first aid and safety services and fire protection products and services. The company's segments are Uniform Rental and Facility Services, which consists of the rental and servicing of uniforms and other garments, including flame resistant clothing, mats, mops and shop towels and other ancillary items; and The First Aid and Safety Services, which consists of first aid and safety products and services.

Ecolab Inc.

Ecolab is a provider of water, hygiene and energy technologies and services. The company's segments include: Global Industrial, which provides water treatment and process applications, and cleaning and sanitizing solutions in the manufacturing, food and beverage processing, chemical, power generation, pharmaceutical and commercial laundry industries; Global Institutional, which provides cleaning and sanitizing products to the foodservice, hospitality, lodging, healthcare, government, education and retail industries; and Global Energy, which serves the process chemicals and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications.

Essent Group Ltd.

Grupo Financiero Galicia SA Sponsored ADR Class B

Healthcare Services Group Inc.

Healthcare Services Group provides management, administrative and operating capability and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the health care industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals. The company's reportable segments are: housekeeping, laundry, linen and other services, which focuses on cleaning, disinfecting and sanitizing of resident rooms, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items; and dietary department services, which focuses on food purchasing, meal preparation and dietitian services.

Interpublic Group of Companies Inc.

Interpublic Group of Companies is an advertising and marketing services company. The company's segment include: Integrated Agency Networks (IAN) and Constituency Management Group (CMG). Within IAN, the company's agencies provide an array of communications and marketing services, each providing a range of solutions for its clients. In addition, the company's domestic integrated agencies provide a range of advertising, marketing communications services and/or marketing services and partner with its operating divisions as needed. CMG provides clients with services, including public relations, meeting and event production, sports and entertainment marketing, corporate and brand identity, and marketing consulting.

Magna International Inc.

Magna is a global automotive supplier whose product capabilities include producing body, chassis, exterior, seating, powertrain, electronic, vision, closure and roof systems and modules, as well as vehicle engineering and contract manufacturing. Co.'s operations are segmented on a geographic basis. Co.'s segments consist of North America, Europe, Asia and Rest of World.

MGIC Investment Corporation

MGIC Investment is a holding company. Through Mortgage Guaranty Insurance Corporation, the company is engaged in the mortgage insurance business. The company provides mortgage insurance to lenders throughout the U.S. and to government sponsored entities. Primary insurance provides mortgage default protection on individual loans and covers unpaid loan principal, delinquent interest and certain expenses associated with the default and subsequent foreclosure or sale approved by the company Through certain other non-insurance subsidiaries, the company also provides various services for the mortgage finance industry, such as contract underwriting, analysis of loan originations and portfolios, and mortgage lead generation.

NMI Holdings Inc. Class A

NMI Holdings is an insurance holding company. Through its subsidiaries, the company is engaged in the provision of mortgage insurance (MI). MI protects lenders and investors from default-related losses on a portion of the unpaid principal balance of a covered mortgage. The company's principal types of MI coverage include: primary MI, which provides default protection on individual mortgage loans at specified coverage percentages; and pool insurance, which is generally used to provide additional credit enhancement for certain secondary market mortgage transactions. The company also provides outsourced loan review services to mortgage originators through its subsidiary, NMI Services, Inc.

Omnicom Group Inc

Omnicom Group is a holding company, engaged in providing advertising, marketing and corporate communications services. The company's networks and agencies provide a range of services in the following fundamental disciplines: advertising, customer relationship management, public relations and healthcare. The company's Service offerings include, among others, advertising, branding, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, digital/direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, and imaging.

Publicis Groupe S.A. ADS,

Radian Group Inc.

Radian Group is a holding company. Through its subsidiaries, the company provides mortgage insurance and products and services to the real estate and mortgage finance industries through its two business segments: Mortgage Insurance and Services. The company's Mortgage Insurance segment provides credit-related insurance coverage, principally through private mortgage insurance, as well as other credit risk management solutions, to mortgage lending institutions and mortgage credit investors. The company's Services segment is primarily a fee-for-service business that provides an array of real estate, title and mortgage services to market participants across the mortgage and real estate value chain.

Sodexo S.A. ADS

Tennant Company

Tennant is a manufacturer of floor cleaning equipment. The company provides products and solutions consisting of mechanized cleaning equipment, detergent-free and other cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings, and business solutions such as financing, rental and leasing programs, and machine-to-machine asset management solutions. The company's products are used in several types of environments including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets, and more.

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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