Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The SPX gapped-up to reverse its 1-month downtrend on 5/3/24, followed by another upside gap on 5/6/24, and yet another on 5/15/24 on the breakout to all-time highs</li>
<li>All of these gaps remain unfilled which signals upside power, a very bullish sign. These gaps at 5250-5263, 5127-5142, and 5073-5101 are now areas to expect short-term support, if tested.</li>
<li>Market dynamics remain healthy and the S&amp;P 500, Nasdaq 100, and DJI are all breaking out to new all-time highs, helping validate our bullish outlook.</li>
</ul>


The SPX gapped-up to reverse its 1-month downtrend on 5/3/24, followed by another upside gap on 5/6/24, and yet another on 5/15/24 on the breakout to all-time highs
All of these gaps remain unfilled which signals upside power, a very bullish sign. These gaps at 5250-5263, 5127-5142, and 5073-5101 are now areas to expect short-term support, if tested.
Market dynamics remain healthy and the S&amp;P 500, Nasdaq 100, and DJI are all breaking out to new all-time highs, helping validate our bullish outlook.


New All-Time Highs Validates Our Bullish Outlook; Risk-On Signals Abound. Buys in Aluminum, Shippers

<ul>
<li>Over the past two weeks we've discussed the possibility that further downside was limited (4/23/24 Compass) and mounting evidence that suggests the pullback lows may be in (4/30/24 Compass).</li>
<li>Major risk-on developments for the broad equity market have continued to roll in over the past week, which we discuss below.</li>
<li>We continue to believe the lows are in, and we see the pullback to the 100-day MA on the S&amp;P 500 as healthy/normal within the ongoing bull market.</li>
</ul>


Over the past two weeks we've discussed the possibility that further downside was limited (4/23/24 Compass) and mounting evidence that suggests the pullback lows may be in (4/30/24 Compass).
Major risk-on developments for the broad equity market have continued to roll in over the past week, which we discuss below.
We continue to believe the lows are in, and we see the pullback to the 100-day MA on the S&amp;P 500 as healthy/normal within the ongoing bull market.


Major Risk-On Developments; Bullish Outlook Intact; Downgrading Health Care $XLV to Underweight

iShares MSCI Emerging Markets / Technical Analysis

<ul>
<li>The bullish outlook we initiated in early November 2023 remains intact. The SPX and QQQ still refuse to close below their 20-day MAs/21-day EMAs for more than 2-3 consecutive days.</li>
<li>Even if/when they do, important supports are close by, including 4983-5050 on the S&amp;P 500 and $425-$433 on QQQ (gap supports from 2/22/24). Anything above 4800 SPX is a buy.</li>
<li>We continue to get an ever-increasing number of global indexes/Sectors with long-term breakouts, the latest being the MSCI Emerging Market and Frontier indexes. Clearly risk-on behavior.</li>
</ul>


The bullish outlook we initiated in early November 2023 remains intact. The SPX and QQQ still refuse to close below their 20-day MAs/21-day EMAs for more than 2-3 consecutive days.
Even if/when they do, important supports are close by, including 4983-5050 on the S&amp;P 500 and $425-$433 on QQQ (gap supports from 2/22/24). Anything above 4800 SPX is a buy.
We continue to get an ever-increasing number of global indexes/Sectors with long-term breakouts, the latest being the MSCI Emerging Market and Frontier indexes. Clearly risk-on behavior.


Long-Term Breakouts for Emerging and Frontier Markets; Treasury Yields and Commodities Rising YTD

Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Equity Bottom-Up

<ul>
<li>This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. </li>
<li>The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.</li>
<li>This week we flag: Beyond Meat, Madison Sqr Garden, Trinity, Portillo, Jack in the Box</li>
</ul>


This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.
This week we flag: Beyond Meat, Madison Sqr Garden, Trinity, Portillo, Jack in the Box


Solvency Risk Short Candidates: Beyond Meat, Madison Sqr Garden, Trinity, Portillo, Jack in the Box

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are quite a few changes for stocks across the <a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a>, MidCap 400 Index and SmallCap 600 Index that will result in a one-way trade of US$30bn.</li>
<li>There are adds/deletes that have over 5 days of ADV to trade from passive funds, plus many stocks that have over +/-1 day of ADV from other changes.</li>
<li>The largest impact of passive buying will be on <a href="https://www.smartkarma.com/entities/keurig-dr-pepper-inc" target="_blank" data-smartkarma-citation="entities:15411:1" rel="noopener">Keurig Dr Pepper Inc (KDP US)</a>, <a href="https://www.smartkarma.com/entities/on-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:2729:1" rel="noopener">On Semiconductor (ON US)</a> and <a href="https://www.smartkarma.com/entities/vici-properties-inc" target="_blank" data-smartkarma-citation="entities:28786:1" rel="noopener">VICI Properties Inc (VICI US)</a>. </li>
</ul>


There are quite a few changes for stocks across the S&amp;P 500 (SPX INDEX), MidCap 400 Index and SmallCap 600 Index that will result in a one-way trade of US$30bn.
There are adds/deletes that have over 5 days of ADV to trade from passive funds, plus many stocks that have over +/-1 day of ADV from other changes.
The largest impact of passive buying will be on Keurig Dr Pepper Inc (KDP US), On Semiconductor (ON US) and VICI Properties Inc (VICI US). 


S&P500 Index Rebalance: One-Way Trade of US$30bn

United States

Mueller Water Products, Inc. manufactures a broad range of water infrastructure and flow control products for use in water distribution networks, water and wastewater treatment facilities, gas distribution systems and fire protection piping systems. The Company's product portfolio includes engineered valves, hydrants, pipe fittings and ductile iron pipe.

Standex International Corporation manufactures multi-industry products, with operations in the food service, industrial products, and consumer products business segments.  The Company's products include food merchandising and display cases, reusable and expendable space launch vehicles, and magnetic components and connectors.  Standex operates in the United States and overseas.

Tennant Company designs, manufactures, and sells non-residential floor maintenance equipment, floor coatings, and related products.  The Company's products include scrubbers, sweepers, extractors, burnishers, buffers, floor coatings, and full-service equipment support.  Tennant sells its products around the world.

Alamo Group Inc. designs, manufactures, and distributes heavy duty, tractor-mounted mowing and vegetation maintenance equipment and replacement parts, for industrial and agricultural end-users.  The Company sells its products in Europe and the United States.

ESCO Technologies Inc (ESCO) operates as a company. The Company supplies special purpose communications systems for electric, gas, and water utilities. ESCO offers software to support advanced metering applications. ESCO also provides engineered filtration products to the aviation, space, and process markets from around the world.

Hillenbrand, Inc. manufactures and sells premium business-to-business products and services. The Company designs, produces, markets, and services equipment and systems used in processing applications, as well as offers compounding and extruding equipment, bulk materials handling systems, and related engineering services.

Barnes Group Inc. is an international industrial and aerospace manufacturer and service provider, serving a wide range of end markets and customers. The engineered products and services provided are used in applications that provide transportation, communication, manufacturing and technology to the world.

Kennametal Inc. manufactures, purchases, and distributes tools, tooling systems, and solutions to the metalworking, mining, oil, and energy industries.  The Company also manufactures and distributes wear-resistant parts for a wide range of industries.  Kennametal operates worldwide.

Enerpac Tool Group Corp. operates as an industrial tools and services company. The Company offers high pressure hydraulic tools, controlled force products, and solutions for precise positioning of heavy loads. Enerpac Tool Group serves customers worldwide.

Albany International Corporation designs, manufactures, and markets paper machine clothing. Paper machine clothing consists of large continuous belts of engineered fabrics that are installed on paper machines and carry the paper stock through each stage of the paper production process. The Company sells its products in the United States, Canada, and overseas.

Zhengzhou Coal Mining Machinery Group Co., Ltd. develops and manufactures hydraulic support in coal industry.  The Company's products include two legs hydraulic support, four legs hydraulic support, caving support, and hydraulic valve.

Zhengzhou Coal Mining Machinery Group Co (601717 CH)

ORGANO CORPORATION manufactures water treatment equipment and other related peripherals and supplies.  The Company also produces industrial chemical products such as activated carbon and charcoal, water treatment compounds, and ion exchange resins.  Organo's water treatment systems are used for ultra-pure water production in nuclear power and semiconductor manufacturing processes.

Neway Valve (Suzhou) Company Limited designs, manufactures and sells industrial valves. The Company's main products include gate valves, ball valves, globe valves, check valves, butterfly valves, regulating valves, safety valves, nuclear valves, and wellhead equipment.

Hyundai Mipo Dockyard Co., Ltd. is shipbuilders in the sectors of medium-sized conventional ships and specialized vessels. The Company constructs and delivers medium-ranged product carriers, chemical tankers, containerships, LPG carriers, pure car truck carriers and others.

China First Heavy Industries develops, manufactures, and sells heavy industry equipment.  The Company's products include metallurgical equipment, heavy container, nuclear island equipment, large-scale power generation equipment, castings and forgings, mining parts, heavy forging equipment, mining equipment and special products.

BEML Limited produces and sells earthmoving equipment, including railway rolling stock, heavy duty vehicles, wheel loaders, trailers, excavators and heavy recovery vehicles.

Titagarh Wagons Ltd. manufactures railroad cars.  The Company produces railway wagons, Bailey bridges, earth moving and mining equipment, and steel and iron castings.

Kirloskar Brothers Limited manufactures agricultural implements, power-driven pumps, sugarcane crushers, sluice valves, concrete mixers, ploughs, turbines, iron and steel castings and machine tools. The Group provides its customers with Finite Element Modelling and Computational Fluid Dynamics packages for Hydraulic analysis.  Kirloskar also supplies several turnkey Mini-Hydel power projects.

Commercial Engineers & Body Builders Company Ltd. builds truck and locomotive bodies.  The Company produces dump truck, tanker, cargo box, skip-loader, garbage, troop carrier, prison van, fire engine and ambulance bodies; and locomotive, boxcar and passenger coach bodies.

CNHTC Jinan Truck Co., Ltd. manufactures and retails heavy duty trucks.

Trinity Industries, Inc. manufactures transportation, construction, and industrial products.  The Company's products include tank and freight railcars, inland hopper and tank barges, highway guardrail and safety products, ready-mix concrete, and other products.  Trinity also leases railcars and other products. The Company markets its products in the United States and internationally.

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Trinity Industries (TRN US)

New All-Time Highs Validates Our Bullish Outlook; Risk-On Signals Abound. Buys in Aluminum, Shippers

New All-Time Highs Validates Our Bullish Outlook $SPX $QQQ $DJI; Risk-On Signals Abound. Three SPX upside gaps in May signals bulls firmly in...

Vermilion Research

Major Risk-On Developments; Bullish Outlook Intact; Downgrading Health Care $XLV to Underweight

Major Risk-On Developments; Bullish Outlook Intact $SPX $QQQ $IWM; Downgrading Health Care $XLV to Underweight Despite Still Being Bullish on $XBI....

Vermilion Research

Long-Term Breakouts for Emerging and Frontier Markets; Treasury Yields and Commodities Rising YTD

Long-Term Breakouts for Emerging and Frontier Markets $EEM $FM; Bullish Outlook Intact on $SPX $QQQ; Treasury Yields and Commodities Rising YTD has...

Vermilion Research

Solvency Risk Short Candidates: Beyond Meat, Madison Sqr Garden, Trinity, Portillo, Jack in the Box

This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows. This week we flag: Beyond Meat,...

Eric Fernandez, CFA

S&P500 Index Rebalance: One-Way Trade of US$30bn

There are 3 changes for the S&P500, plus more changes for the MidCap and SmallCap indices. We estimate a one-way trade of US$30bn across the...

Brian Freitas

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