Vermilion Compass: Weekly Equity Strategy
Omicron Variant Creates Near-term UncertaintyLast Wednesday's Fed minutes release suggesting a stepped up tapering schedule combined with uncertainty over the impact of the Omicron virus variant created a mini panic by investors. While the pullbacks created some damage to major indexes, we continue to believe the longer-term outlook for stocks remains positive. Near-term however, we expect markets to remain mixed and vulnerable to any significant negative news surrounding the impacts of the Omicron variant
The Russell 2000 is breaking down and is near 52-week RS lows vs. the S&P 500. IWM is near a support level near Friday's low near the 220 level. A break back above the 234.50 level would provide for a bullish outlook
S&P 500. The S&P 500 has support at Friday's low of 4585 and the breakout level near 4545. We believe the markets will remain mixed until concerns of the Omicron mutation can be ascertained...see page 3
Treasury bonds. 10-year Treasury yields remain above the 1.4% support level and 30-year remains above support at 1.76%. As long as the following support levels hold, we believe that a positive backdrop for the markets exists. We believe the pullback in banks and thrifts also remains constructive... see page 4 of KRE
Crude Oil. Despite last week's dramatic decline, crude oil prices remain above the 200-day moving average at 69.77 and may provide for a good entry. Historically the opening of the SPR is a short-term solution to a much larger problem. The sudden decline in oil prices are likely due to concern over the impact of the Omicron virus is likely to have on travel . ... see XOP on page 4
Defensives continue to underperform. XLP (Cons Staples) vs XLY (Cons. Cylicals) remains near multi-year lows. XLU (Utilities) remain near RS lows vs the S&P 500...see page 5
Upgrading Technology Sector to Overweight, Cap-weighted Technology is making RS highs vs the S&P 500.
Downgrading Communications to underweight. The Communication Sector is hitting 52-week RS lows.
Bank of Montreal is a financial services organization. Co. provides a range of retail banking, wealth management and investment banking products and services. Co. serves its clients through three operating groups: Personal and Commercial Banking, which provides financial services to personal and commercial customers; Private Client Group, which provides wealth management products and services to individuals and select institutional segments; and BMO Capital Markets, which provides clients financial and capital markets services to corporate, institutional and government clients.
Fng NV. FNG NV is a Belgium-based fashion company. It designs and distributes clothing and shoes for women, children and men through its own concept stores in Belgium and the Netherlands (Benelux), as well through a network of multi-brand stores on the domestic markets and abroad. The Company operates through three business units: Brantano, a multi-channel retail chain specializing in footwear; Miss Etam, active in design, procurement and sales through offline and online channels of women's clothing, and FNG Roots, which creates and distributes fashion brands for women and children, such as Fred & Ginger, CKS, Claudia Straeter, Expresso and Steps, among others, as well as comprises the Company's buying platform.
The Home Depot is a home improvement retailer. The company provides its customers an assortment of building materials, home improvement products, lawn and garden products, and decor products and provides a number of services, including home improvement installation services and tool and equipment rental. The company also maintains a network of distribution and fulfillment centers, as well as a number of e-commerce websites. The company provides a number of programs for its Professional Customers to meet their particular needs, and for its Do-It-Yourself and Do-It-For-Me customers, the company provides a number of installation services. The company also provides tool and equipment rentals for its customers.
Lowe's Companies is a home improvement retailer. The company provides home improvement products in lumber and building materials, appliances, seasonal and outdoor living, tools and hardware, fashion fixtures, rough plumbing and electrical, paint, millwork, lawn and garden, flooring, and kitchens categories. The company provides installation services through independent contractors in product categories, including appliances, flooring, kitchens, lumber and building materials, and millwork. The company also provides extended protection plans for various products within the appliances, kitchens, fashion fixtures, millwork, rough plumbing and electrical, seasonal and outdoor living, and tools and hardware categories.
Sherwin-Williams is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to industrial, commercial and retail customers. The company's segments are: The Americas Group, which markets and sells Sherwin-Williams? and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products; Consumer Brands Group, which supplies architectural paints, stains, varnishes, and industrial products, among others; and Performance Coatings Group, which develops and sells industrial coatings, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and resins and colorants.
Toronto Dominion Bank provides financial services. Co.'s segments comprised of: Canadian Retail, which include Canadian personal and commercial banking businesses, Canadian credit cards, TD Auto Finance Canada and Canadian wealth and insurance businesses; US Retail, which includes the US personal and commercial banking businesses, US credit cards, TD Auto Finance US, US wealth business and the Bank's investment its subsidiary, TD Ameritrade Holding Corporation; and Wholesale Banking, which provides a range of capital markets, investment banking, and corporate banking products and services. As of Oct 31 2017, Co. had total assets of C$1.28 trillion and total deposits of C$832.82 billion.
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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