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Market Radar 19. December 2022

Market

Gold, silver and oil in focus
US stock indices slightly oversold

Pre-IPO, the major US indices are rising slightly today. After all, the SPY was able to close above the 380 mark yesterday. With US equity markets somewhat oversold, there could now be an up move until Thursday. If this is extended until Friday or Monday, I would be surprised. Currently, after most up movements, the fun brake follows relatively quickly. Pre-IPO we see this in the silver price. Yesterday silver was still the star in the stock market sky, today it belongs to the loosers. We can probably only expect long trend movements again in 2023, right?

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What do we see under the radar of the major stock indices?

For today, copper, gold and silver mines as well as oil and gas service providers (XES) are being upgraded. These industries receive the day stamp “Buy or top-up”. The silver price (SLV) was able to overcome the interim high of December 13 ($ 22.20) yesterday at the end of the day (daily close in the SLV: $ 22.23), the gold price closed only just below the interim high of December 13.

Prices for precious metals rise higher than prices for mining companies
The ETFs for the gold and silver mines (GDX and SIL), on the other hand, closed yesterday quite well below the interim highs of 13 December. So we have been seeing for a week that the prices of gold and silver are developing relative strength against the mining companies. According to Risk-On / Risk-Off logic, this means that the Risk-Off Part now precedes the Risk-On Part. It had been the other way around before December 13. From this, I would deduce that the risk appetite for buying gold and silver mining stocks will now decrease somewhat. I do not necessarily want to predict a trend change, but only that from now on the gold price and no longer the share prices of mining companies such as Barrick Gold (GOLD), Iamgold (IAG) or Agnico-Eagle Mines (AEM) determine where the journey will go.

Oil equipment suppliers rise higher than oil producers
Most oil and gas stocks have been able to move higher lows over the past decade or so from the marked low that can be found for all these stocks around December 9. December can be located. This gives hope that these stocks are only consolidating, not correcting. Now it is important to reach a higher high in the chart at the end of the day. We are currently seeing this more from equipment suppliers than from producers: Halliburton (HAL) and Schlumberger (SLB), for example, reached a higher high yesterday at the end of the day. Halliburton and Schlumberger do not produce oil, but act as service providers to the oil industry. The corresponding ETF (XES) also shows relative strength against the ETF for oil producers (XOP), which includes Exxon Mobil (XOM). Consequently, Exxon Mobil did not manage to form a higher high yesterday.

The stock is currently trading at $73.73. New quarterly figures will be published at the end of January 2023. This stock would also be interesting for a pre-earning trade.

In addition to the medical device industry, we see entry stamps for today in areas that we wouldn’t necessarily expect now that the bear market may continue.

Swing Short Chance at Mercadolibre
I took a short position on Mercadolibre (MELI) yesterday. The stock reached the upper trend channel in the chart, which is pointing downwards. I am now speculating on a continuation of the trend direction.

Mercadolibre is one of the largest e-commerce marketplaces with a market capitalization of $44 billion and is mainly present in Latin America. The current P/E ratio is above 100, but is expected to fall to 40 by 2024. Historically, the stock has been valued at P/E ratios between 40 and 80. The expected high earnings growth of over 200% over the next two years seems a bit ambitious to me. At $875.91, the stock is currently trading at approximately 55% below the all-time high ($2020.00) reached on January 18, 2021.

Mercadolibre was among such popular stocks as Amazon, Nvidia and the like among investors until early 2021, because they had (and still are) common that they have a strong market position. Investors ignored the high valuation. Presumably, the stock is still not cheap enough, so it seems to be too early for a chart technical trend change.