Report
Dave Nicoski ...
  • Ross LaDuke
EUR 45.95 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Are the Lows "In" for this Pullback?

While we are not yet out of the woods, we continue to see evidence that suggests the lows may be "in" for this pullback. Last week (4/23/24 Compass) we discussed the possibility that further downside was limited on the S&P 500 due to a multitude of reasons (SPX had simply filled 2/22/24 gap support that we had been discussing since late-February, Russell 2000 and Equal-Weighted S&P 500 were holding above key supports, short-term oversold conditions, subdued high yield spreads, RS for defensives still below their October 2023 lows, several important commodities holding below resistance, Treasury yields and the U.S. dollar holding below resistances, and that we continue to see far more constructive long-term price patterns than bearish ones). Considering all these market dynamics remain unchanged and that broad market indexes have staged strong bounces since, we continue to view the latest pullback to the 100-day MA on the S&P 500 as healthy and normal within the ongoing bull market. 5-6% pullbacks to the 100-day MA on the S&P 500 provided ideal entry points throughout the 2021 bull market, and this pullback may be no different... see chart below.

S&P 500, Equal-Weighted S&P 500, Russell 2000. 4920-4950 remains support on the S&P 500 as it potentially forms a new, less-steep, uptrend; in order to get a larger pullback to 4800, the 4920-4950 level would need to break. And, to reiterate, as long as the S&P 500 remains above 4800, we view pullbacks as buying opportunities. The equal-weighted S&P 500 (RSP) has held strong at major $158 support (the prior all-time high from January 2022, when adjusted for dividends). The Russell 2000 (IWM) held above critical support at $187.50-$190 and 5+ month RS support, and is now back above $199... see page 3.
Bullish Market Dynamics. Market dynamics continue to lean bullish: (1) RS for defensive Sectors remains below their October 2023 lows for Staples (XLP), Health Care (XLV), and Utilities (XLU); we will need to see RS break above these levels for at least two, but preferably all three Sectors, in order for us to brace for a deeper pullback in the broad equity market. (2) Treasury yields and (3) the U.S. dollar (DXY) remain below important resistances from October/November 2023. (4) Bond market volatility (MOVE index) remains near 2-year lows. (5) High yield spreads are back at 2+ year narrows. (6) Commodities remain below critical resistances -- $95 on WTI crude oil, $74.60 on gasoline (UGA), and $33.20 on the Bloomberg Commodity index (DJP). (7) Cap-weighted Discretionary (XLY) displays a bullish YTD RS downtrend reversal...
Underlyings
Brook Crompton Holdings

Brook Crompton Holdings Ltd. Brook Crompton Holdings Ltd, formerly Lindeteves-Jacoberg Limited, is a Singapore-based company engaged in the distribution of electric motors. The principal activities of the Company consist of investment holding and provision of management services to its subsidiaries. The Company's segments include Asia Pacific, United Kingdom and North America. The Company's subsidiaries are engaged in the distribution of electric motors. The Company offers products that are deployed in sectors ranging from marine, mining, and oil and gas to heating, ventilation, air conditioning (HVAC). Under its Brook Crompton brand, the Company's subsidiary, Brook Crompton UK Limited, covers the markets in the United Kingdom, the Middle East, North Africa and Continental Europe; Brook Crompton USA, Inc and Brook Crompton Limited (Canada) covers the North America market, and Brook Crompton Asia Pacific Pte Ltd covers the Asia Pacific market.

Century Aluminum Company

Century Aluminum is a holding company. Through its subsidiaries, the company produces primary aluminum and operates aluminum reduction facilities in the U.S. and Iceland. The company's principal subsidiaries are: Century Kentucky, Inc., which operates a primary aluminum reduction facility in Hawesville, KY; Nordural ehf, which operates a primary aluminum reduction facility in Grundartangi, Iceland; Century Aluminum Sebree LLC, which operates a primary aluminum reduction facility in Robards, KY; Century Aluminum of South Carolina, which operates a primary aluminum reduction facility in Goose Creek, SC; and Nordural Helguvik ehf, which owns a greenfield primary aluminum project in Helguvik, Iceland.

Costamare Inc.

Costamare is an international owner of containerships. Co. is engaged in chartering vessels to many of the world's liner companies. As of Feb 23 2018, Co. has a fleet of 71 containerships with a total capacity in excess of 466,000 twenty foot equivalent units (TEUs). Co.'s strategy is to time charter its containerships to a geographically diverse, financially strong and loyal group of liner companies. Co.'s containerships operate primarily under multi-year charters and therefore are not subject to the effect of seasonal variations in demand. Some of Co.'s customers are A.P. Moller-Maersk, MSC, Evergreen, Hapag Lloyd and COSCO.

Genco Shipping & Trading Ltd.

Global Ship Lease Inc. Class A

Global Ship Lease is a holding company. Through its subsidiaries, the company is engaged in the business of owning and chartering out containerships under fixed rate charters to container liner companies.

HIMALAYA SHIPPING LTD.

HOWMET AEROSPACE INC COM

Kirby Corporation

Kirby operates tank barge. The company's marine transportation segment provides marine transportation services, operating tank barges and towing vessels transporting bulk liquid products. The company transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. The company's distribution and services segment, sells genuine replacement parts, provides service mechanics to overhaul and repair engines, transmissions, reduction gears and related oilfield services equipment, rebuilds component parts or diesel engines, transmissions and reduction gears, and related equipment used in oilfield services, marine, power generation, on-highway and other industrial applications.

KNIFE RIVER CORPORATION

Martin Marietta Materials Inc.

Martin Marietta Materials is a natural resource-based building materials company. The company supplies aggregates (crushed stone, sand and gravel) through its network of quarries, mines and distribution yards. The company also provides cement and downstream products, namely, ready mixed concrete, asphalt and paving services. The company conducts its Building Materials business through three segments: Mid-America Group, Southeast Group and West Group. The Mid-America and Southeast Groups provide aggregates products only. The West Group provides aggregates, cement and downstream products. The company also has the Magnesia Specialties segment, which includes its magnesia-based chemicals and dolomitic lime businesses.

Matson Inc.

Matson is a holding company engaged in the provision of ocean transportation and logistics services. The company's Ocean transportation segment business is conducted through Matson Navigation Company, Inc., which provides a lifeline of ocean freight transportation services to the domestic non-contiguous economies of Hawaii, Alaska and Guam, and to other island economies in Micronesia and operates an expedited service from China to Long Beach, CA, and provides services to Okinawa, Japan and various islands in the South Pacific. The company's Logistics business is conducted through Matson Logistics, Inc., an asset-light business that provides a variety of logistics services to its customers.

Navios Maritime Partners

Navios Maritime Partners L.P. is an international owner and operator of dry cargo and container vessels. The Company is engaged in the seaborne transportation services of a range of dry cargo commodities, including iron ore, coal, grain and fertilizer, and also containers, chartering its vessels under medium to long-term charters. It focuses on providing seaborne shipping services under long-term time charters. As of December 31, 2016, it controlled 12 Panamax vessels, nine Capesize vessels, three Ultra-Handymax vessels and seven container vessels. Panamax vessels are vessels capable of carrying a range of dry cargo commodities, including iron ore, coal, grain and fertilizer and being accommodated in various discharge ports. Capesize vessels are dedicated to the carriage of iron ore and coal. Ultra-Handymax vessels are similar to Panamax vessels although with less carrying capacity, and have self-loading and discharging gear on board to accommodate undeveloped ports.

Norsk Hydro ASA

Norsk Hydro is an aluminium group based in Norway. Co. is engaged in the supply of aluminium and aluminium products. Co. supplies casthouse products, such as extrusion ingots, sheet ingots and foundry alloys. Co's customers are active in sectors such as the packaging, lithographic, building, automotive and transport sectors. In addition, Co. is engaged in the production of power in Norway. Its business is divided into six operating segments: Bauxite & Alumina, Primary Metal, Metal Markets, Rolled Products, and Energy and Other and Eliminations.

Safe Bulkers Inc.

Safe Bulkers is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for consumers of marine drybulk transportation services. As of Feb. 9, 2018, Co. had a fleet of 39 drybulk vessels, with an aggregate carrying capacity of 3,513,800 dwt and an average age of 7.6 years. Co. deploys its vessels on both period time charters and spot time charters. The vessels on period time charters provide Co. with relatively stable cash flow and utilization rates, while the vessels in the spot market allow Co. to maintain its flexibility in low charter market conditions.

Summit Materials Inc. Class A

Summit Materials is a holding company. Through its subsidiaries, the company is a construction materials company. The company produces and sells aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. The company is engaged in paving and related services. The company has operations in various states across the United States and in British Columbia, Canada. The company operates a municipal waste landfill in its East segment, and has construction and demolition debris landfills and liquid asphalt terminal operations in its West and East segments.

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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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