Vermilion Compass: Weekly Equity Strategy
Continue to Ride the Trend HigherAfter discussing that risk/reward favored buyers in late-October as our key supports were being tested (10/24/23 and 10/31/23 Compass reports), we outlined in our 11/7/23 Compass our belief that a significant year-end rally was likely underway. Market-generated information has continued to be of the risk-on variety, which has only reinforced our bullish outlook on the broad equity market. Therefore, we continue to expect a rally into year-end and beyond.
S&P 500, Russell 2000, DJI Testing Resistance. As we discussed last week (11/21/23 Compass), even a minor pullback of 2-5% is far from a guarantee, considering recent breakaway gaps in the S&P 500, DJI, and Nasdaq 100, and what appears to be an ongoing "lockout rally." Still, we would not be surprised to see a minor pullback of 2-5%, particularly with the SPX, Russell 2000 (IWM), and DJI approaching resistances of 4600-4607, $180, and 35,650, respectively. More importantly, if there is a 2-5% pullback, we would view it as a buying opportunity... see charts below.
Reasons to Expect More Upside. We continue to see many reasons to be bullish on the broad equity market into year-end and the early part of 2024. Reasons include (1) bullish seasonality due to positive option dealer flows in what has been a strong 2023 for the S&P 500 and Nasdaq 100, (2) the U.S. dollar's (DXY) trend lower is likely to continue toward $101-$101.50, (3) Treasury yields across the curve have, at the very least, put in short-term tops (and more likely, intermediate-term tops), (4) high yield spreads are at 19-month narrows, (5) defensive Sectors including Consumer Staples (XLP) and Utilities (XLU) remain in YTD RS downtrends, and (6) breadth continues to bottom-out... see page 3.
Gold and Silver With Bullish Inflections; Oil Trending Lower. Gold reversed its 5.5-month downtrend in mid-October, and has been developing positively since. Recent breakdowns in Treasury yields have provided a catalyst for both gold and silver to rally, and silver is just now reversing its 7.5-month downtrend. We recommend adding exposure to gold and silver; a test of multi-year resistance at $2088-2090 for gold appears likely, and we would also monitor for a potential breakout. We also take a look at gold miners (GDX, GDXJ) which show signs of bottoming. On the other hand, WTI crude oil continues to trend lower, something we have expected since our 9/26/23 Compass... see pages 4-6.
Brookdale Senior Living is a holding company. Through its subsidiaries, the company is an operator of senior living communities. The company's Community offerings include: independent living, which is for middle to upper income seniors; assisted living and memory care, which provides housing and assistance to mid-acuity frail and elderly residents; and continuing care retirement, which provides living arrangements and services to accommodate various physical ability and health. Through its Health Care Services segment the company provides home health, hospice and outpatient therapy services, and education and wellness programs, to residents of its communities and to seniors living outside of its communities.
Burlington Stores is a holding company. Through its indirect subsidiary, Burlington Coat Factory Warehouse Corporation sells merchandise including: women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, baby, home, coats, beauty, toys and gifts. The company operates stores under the names Burlington Stores, Cohoes Fashions, Super Baby Depot, MJM Designer Shoes and an online store. Cohoes Fashions provides products similar to those offered by Burlington Stores. MJM Designer Shoes provides moderately priced designer and fashion shoes. The Super Baby Depot stores provides baby clothing, accessories, furniture and other merchandise in the middle to higher price range.
Ensign Group is a holding company. Through its operating subsidiaries, the company provides skilled nursing, senior living and rehabilitative services, as well as other ancillary businesses. In transitional and skilled services, the company provides short and long-term nursing care services for patients with chronic conditions, prolonged illness, and the elderly. The company's senior living companies provide residential accommodations, activities, meals, housekeeping and assistance in the activities of daily living to seniors who are independent or who require some support, but not the level of nursing care provided in a skilled nursing operation. The company's other business lines includes of mobile ancillary services.
Rosinter Restorants Holding PAO (Rosinter Restaurants Holding PJSC) is a Russia-based company engaged in the operation of restaurant. The Company offers Italian, Japanese, American and local Russian cuisine. It operates IL Patio pizza pasta grill, Planet Sushi, American Bar and Grill, Cafe Des Artistes, Pechki-Lavochki and 1-2-3 Cafe, as well as T.G.I. Friday's and Costa Coffee. Operations are carried out in the Russian Federation, Ukraine, Belarus, Kazakhstan, Latvia, the Czech Republic, Poland and Hungary. The Company operates through numerous subsidiaries and affiliated companies located domestically, as well as abroad. On September 4, 2014, the Company sold 51% stake in Rosinter Restaurants Samara ZAO to Restorannaya Ob'yedinennaya Set' i Noveyshiye Tekhnologii Evroamerikanskogo Razvitiya Restorants OOO.
TJX Companies is an off-price apparel and home fashions retailer. The company's segments comprised of: Marmaxx, which sells family apparel (including footwear and accessories), home fashions (including home basics, decorative accessories and giftware) and other merchandise; HomeGoods, which provides a range of home fashions, including home fashions, including furniture, rugs, lighting, soft home, decorative accessories, tabletop and cookware as well as pet, kids and gourmet food departments; TJX Canada, which operates the Winners, HomeSense and Marshalls chains in Canada; and TJX International, which operates the T.K. Maxx and HomeSense chains in Europe and the T.K. Maxx chain in Australia.
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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