Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.55 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Rally Continues Following Breaks in USD & 10-Yr Yield

Our Russell 2000 (IWM) and S&P 500 targets for this rally have been the 200-day MAs, coinciding with YTD downtrends. The Russell already hit this target while the S&P is closing in, less than 1% away. Still, the vast majority of signals point to further upside ahead for the market indexes. These same signals also suggest a possible end to this bear market, something that we have said would be the case if the IWM and S&P 500 can break above (and stay above) their respective 200-day MAs/YTD downtrends.

Further Upside/Major Bottom in Place? While we would like to see the S&P 500 and Russell 2000 (IWM) break above their respective YTD downtrends/200-day MAs in order to declare a major bottom, there continue to be signals that suggest further upside is likely, including: (1) The U.S. dollar (DXY) is breaking its 9-month uptrend and horizontal support at $109.35, a key level we have been watching; this is a strong signal that the DXY could be topping. (2) The 10-year Treasury yield is decisively breaking its 3.5-month uptrend. (3) The Dow Jones Industrial Average is already breaking above its YTD downtrend/200-day MA. (4) Cyclical value Sectors including Industrials (XLI), Energy (XLE), equal-weighted Consumer Discretionary (RCD), and Financials (XLF) are all hitting 6+ month RS highs. (5) All these Sectors mentioned, plus Materials (XLB) and Health Care (XLV), display bullish 7-month to YTD downtrend reversals. (6) The small-cap vs. large-cap ratio recently hit 11-month highs. (7) Breadth remains healthy. (8) The MSCI ACWI ex-US (ACWX), EAFE (EFA), and many indexes within Europe (EURO STOXX 50, DAX, CAC 40, etc.) are all reversing topside their YTD downtrends. (9) Lastly, seasonality is bullish based on the presidential cycle and standard November-January tendencies. These are all risk-on signals that suggest the bear market could be over, or at minimum, that this rally is likely to continue... see charts below and pages 3-6.
Big Picture Trends. The Bloomberg Commodity index (DJP) and WTI crude oil are consolidating. The equal-weighted cyclicals vs. staples ratio (RCD vs. RHS) is on the cusp of a major breakout. ARKK displays a false breakdown at the critical $35 level. Bitcoin broke below major support at 18,500... see pages 7-8.
Underlyings
Borr Drilling

DroneShield

DroneShield is engaged in the development and commercialization of proprietary hardware and software acoustic technology for drone detection and security. Co.'s hardward and software detect drones up to 1km away and instantly alert users in real-time though multiple channels. Co. utilizes audio/acoustic signatures (obtained at the U.S. Department of Defence approved anechoic chamber) to detect drones more accurately when compared with traditional radar, radio frequency, camera, LIDAR and laser methods.

Gulf Island Fabrication Inc.

Gulf Island Fabrication is a fabricator of steel structures, modules and marine vessels. The company's operating divisions include: Fabrication, which fabricates modules and piping systems for onshore refining, petrochemical, liquified natural gas and industrial facilities; Shipyard, which fabricates newbuild marine vessels, including offshore support vessels, multi-purpose service vessels, research vessels, tugboats, salvage vessels, towboats, drydocks, anchor handling vessels and lift boats; and Services, which provides services on offshore platforms, including welding, interconnect piping and other services required to connect production equipment and service modules and equipment on a platform.

Helix Energy Solutions Group Inc.

Helix Energy Solutions Group is an international offshore energy services company that provides specialty services to the offshore energy industry. The company has three business segments: well intervention, which includes vessels and equipment used to perform well intervention services primarily in the U.S. Gulf of Mexico, Brazil, the North Sea and West Africa; robotics, which includes remotely operated vehicles (ROVs), trenchers and ROVDrills designed to complement offshore construction and well intervention services; and production facilities, which includes the Helix Producer I, a floating production vessel, the Helix Fast Response System, and its ownership interest in Independence Hub, LLC.

Helmerich & Payne Inc.

Helmerich & Payne provides drilling services and technologies for oil and gas exploration and production companies. The company's contract drilling business segments are: United States Land, which operates in Colorado, Louisiana, Ohio, Oklahoma, Montana, New Mexico, North Dakota, Pennsylvania, Texas, Utah, West Virginia and Wyoming; Offshore, which operates in United States federal waters in the Gulf of Mexico; and International Land, which has rigs in Argentina, Bahrain, Colombia and United Arab Emirates. The company's drilling technology-based business segment, Helmerich & Payne Technologies, is focused on developing, promoting and commercializing technologies designed to improve the drilling operations.

International Game Technology PLC

Las Vegas Sands Corp.

Las Vegas Sands is a developer of destination properties (Integrated Resorts) that feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, restaurants and other amenities. The company owns and operates Integrated Resorts in Asia and the United States. Through its ownership of Sands China Ltd., the company owns and operates properties including The Venetian Macao Resort Hotel, Sands Cotai Central, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao. In Singapore, the company owns and operates the Marina Bay Sands. The company's Las Vegas Operating Properties includes The Venetian Resort Las Vegas and the Sands Expo Center.

Mammoth Energy Services

Mammoth Energy Services is an energy service company serving both the electric utility and oil and gas industries in North America and United States territories. The company's services include: infrastructure services, which provide restoration, repair, transmission and distribution, and commercial services; pressure pumping services, which provide hydraulic fracturing, sand hauling and water transfer services; natural sand proppant services, which mine, process and sell sand; and other services, which include contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, crude oil hauling, and remote accommodation services.

MGM Resorts International

MGM Resorts International is a holding company. Through its subsidiaries, the company owns and operates casino, hotel, and entertainment resorts across the United States and in Macau. The company's segments include: Las Vegas Strip Resorts, which consists of casino resorts such as Bellagio, MGM Grand Las Vegas, Mandalay Bay, The Mirage, Luxor, New York-New York, Excalibur, and Park MGM; Regional Operations, which consists of casino resorts such as MGM Grand Detroit, Beau Rivage, Gold Strike Tunica, Borgata, MGM National Harbor, MGM Springfield, Empire City, and MGM Northfield Park; and MGM China, which owns and operates casino resorts and the related gaming subconcession and land concessions.

O-I Glass Inc

Owens-Illinois is a manufacturer of glass containers. The company has three reportable segments based on its geographic locations: Americas, Europe, and Asia Pacific. The company produces glass containers for alcoholic beverages, including beer, flavored malt beverages, spirits and wine. The company also produces glass packaging for a variety of food items, soft drinks, teas, juices and pharmaceuticals. The company manufactures glass containers in a range of sizes, shapes and colors. The company also provides engineering support for its glass manufacturing operations through facilities located in the United States, Australia, France, Poland and Peru.

Patterson-UTI Energy Inc.

Patterson-UTI Energy is an oilfield services company that primarily owns and operates fleets of land-based drilling rigs and a fleet of pressure pumping equipment. The company's business segments are: contract drilling services, which markets its contract drilling services to independent and other oil and natural gas operators; pressure pumping services, which provides pressure pumping services to oil and natural gas operators, primarily in Texas, the Mid-Continent region and the Appalachian region; and directional drilling services, which provides a suite of directional drilling services, including directional drilling and downhole performance motors in various onshore oil and natural gas basins.

Precision Drilling

Ross Stores Inc.

Ross Stores and its subsidiaries operate two brands of off-price retail apparel and home fashion stores, which are Ross Dress for Less? (Ross) and dd's DISCOUNTS?. Ross provides name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. dd's DISCOUNTS provides name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day. Both of the company's Ross and dd's DISCOUNTS brands target women and men between the ages of 18 and 54.

Subsea 7 S.A. ADS

TechnipFMC Plc

TechnipFMC is global leader in oil and gas projects, technologies, systems, and services. Co. offers subsea, surface, onshore, and offshore solutions for oil and gas projects. Co. serves customers worldwide. With Co.'s technologies and production systems, integrated expertise, and comprehensive solutions, Co. is transforming Co.'s clients' project economics. Co. is uniquely positioned to deliver greater efficiency across project lifecycles from concept to project delivery and beyond. Through innovative technologies and improved efficiencies, Co.'s offering unlocks new possibilities for Co.'s clients in developing their oil and gas resources.

Tidewater Inc

Tidewater provides offshore marine support and transportation services to the global offshore energy industry through the operation of a fleet of marine service vessels. The company's vessels and associated vessel services provide support of several phases of offshore oil and natural gas exploration, field development and production. These services include towing of, and anchor handling for, mobile offshore drilling units; transporting supplies and personnel necessary to sustain drilling, workover and production activities; offshore construction and seismic and subsea support; and a variety of services such as pipe and cable laying.

TJX Companies Inc

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.

Wynn Resorts Limited

Wynn Resorts is a holding company. Through its subsidiaries, the company is a designer, developer, and operator of resorts featuring hotel rooms, retail space, an array of dining and entertainment options, meeting and convention facilities, and gaming. Through its subsidiary, Wynn Macau, Limited, the company operates two integrated resorts in the Macau Special Administrative Region of the People's Republic of China, Wynn Palace and Wynn Macau. In Las Vegas, NV, the company also operates and, with the exception of certain retail space, own Wynn Las Vegas and Encore Boston Harbor, an integrated resort in Everett, MA, adjacent to Boston.

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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