Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.69 For Business Accounts Only

Vermilion Compass: Weekly Equity Strategy

Many Indexes and Sectors Testing Resistance

Note: This Compass is an abbreviated report. We will resume our normal report layout next week.

In our previous Compass (Jan. 24), we discussed our belief that equities were still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the 4100-4165 area (the top-end of our expected 2023 trading range) on the S&P 500. And, as you will see below, countless other indexes and Sectors are testing important resistance levels. We continue to expect 4100-4165 on the S&P 500 to cap upside, and, while there has yet to be any meaningful short-term deterioration on the market indexes (e.g., they are still above their 20-day MAs), it is possible that yesterday's rejection of 4100 was the beginning of a 5-15% pullback. Upcoming catalysts for big moves include the FOMC announcement on Wednesday and the employment situation report on Friday.

Many Indexes & Sectors Testing Key Resistance Levels. Several indexes and Sectors are testing important resistance levels that date back to 2022, and in many instances, back to 2021. Resistance levels we are watching include 4100-4165 on the S&P 500, $297 on the Nasdaq 100 (QQQ), $190 on the Russell 2000 (IWM), 34,280 on the Dow Jones Industrial Avg., $150-153 on the equal-weighted S&P 500 (RSP), 14,700 on the Dow Jones Transportation Avg., $101 on Industrials (XLI), $36 on Financials (XLF), $129-130 on Energy (XLE), $148 on Consumer Discretionary (XLY), $57 on MSCI China (MCHI), and $41 on ARK Innovation (ARKK). As long as these indexes/Sectors remain below resistance, it tells us upside is limited from here... see charts below and pages 3-5.
Defensive Sectors Testing Important RS Support. Defensive Sectors including Consumer Staples (XLP), Utilities (XLU), and Health Care (XLV) are all testing 1+ year RS support; we would expect RS supports to hold (i.e., some near-term outperformance), which would likely be happening if the broad market is under pressure... see page 6.
Big Picture Trends. Those looking to build a bullish case can point to base breakouts on equal-weighted Discretionary (RCD), Communications (XLC), semiconductors (SOXX), and homebuilders (ITB); with that said, we cannot rule out the potential for false breakouts (which would be bearish). The large-cap value vs. growth ratio suggests value may be due for another round of outperformance... see page 7.
Underlyings
Campbell Soup Company

Campbell Soup is a manufacturer and marketer of food and beverage products. The company's reportable segments are: Meals and Beverages, which includes the retail and foodservice businesses in the United States and Canada, and the meals and shelf-stable beverages business in Latin America; Snacks, which consists of Pepperidge Farm cookies, crackers, fresh bakery and frozen products in United States retail, including Milano cookies and Goldfish crackers, and Snyder's of Hanover pretzels, Lance sandwich crackers, Cape Cod and Kettle Brand potato chips, Late July snacks, Snack Factory Pretzel Crisps, Pop Secret popcorn, Emerald nuts, and other snacking products in the United States and Canada.

Charter Communications Inc. Class A

Charter Communications is a holding company. Through its subsidiaries, the company is a cable operator and a broadband communications company providing video, Internet and voice services. The company also provides its mobile service to residential customers. In addition, the company sells video and online advertising inventory to local, regional and national advertising customers and communications and managed solutions to enterprise customers. The company also owns and operates regional sports networks and local sports, news and community channels. The company owns and operates a two-way telecommunications network which passes various households and small and medium businesses across United States.

Conagra Brands Inc.

Conagra Brands is a packaged goods food company. The company's segments are: Grocery and Snacks, which includes branded, shelf stable food products sold in various retail channels; Refrigerated and Frozen, which includes branded, temperature controlled food products sold in various retail channels; International, which includes branded food products sold in retail and foodservice channels outside of the U.S.; Foodservice, which includes customized food products for sale to restaurants and other foodservice establishments; Pinnacle Foods, which includes and private-label food products; and Commercial Foods, which included commercially branded and private label food and ingredients, among others.

Eli Lilly and Company

Eli Lilly and Company discovers, develops, manufactures, and markets products in a single business segment: human pharmaceutical products. The company's human pharmaceutical products include: diabetes and other endocrinology products, immunology products, neuroscience products, oncology products, and other products. The company's diabetes and other endocrinology products include: Baqsimi? and Basaglar?. The company's immunology products include: Olumiant? and Taltz?. The company's neuroscience products include: Cymbalta? and Emgality?. The company's oncology products include: Alimta?, Cyramza?, Erbitux? and Verzenio?. The company's other products include: Cialis?.

J.M. Smucker Company

Smucker (J.M.) manufactures and markets food and beverage products. The company's principal products are coffee, dog food, pet snacks, cat food, peanut butter, fruit spreads, frozen handheld products, shortening and oils, portion control products, juices and beverages, and flour and baking ingredients. The company has four reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, and U.S. Retail Pet Foods, and International and Away From Home. The U.S. retail market segments represent the sales of food and beverage products to consumers through retail outlets in North America. The International and Away From Home segment represents sales outside of the U.S. retail market segments.

Kraft Heinz Company

Kraft Heinz is a food and beverage company. The company manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world. The company has three reportable segments defined by geographic region: United States, Canada, and Europe, Middle East, and Africa. The company's remaining businesses are combined and disclosed as Rest of World. Rest of World comprises two operating segments: Latin America and Asia Pacific.

Merck & Co. Inc.

Merck & Co. is a global health care company that delivers health solutions through its prescription medicines, vaccines, biologic therapies and animal health products. The company's segments are: Pharmaceutical, which includes human health pharmaceutical products that consist of therapeutic and preventive agents for the treatment of human disorders, and human health vaccine products that consist of preventive pediatric, adolescent and adult vaccines; and Animal Health, which discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as a suite of digitally connected identification, traceability and monitoring products.

Novo Nordisk A/S ADS

Unilever PLC ADS

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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