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Chart Advisor: The Rebound Continues


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Wednesday, July 21st, 2021

1/ Stock prices rise, but on declining volume 

2/ Newmont mining looking weak ahead of earnings 

3/ Copper prices weigh on FCX 

4/ The bottom line

1/ Stock Prices Rise, but On Declining Volume  

The rally on Wall Street continues to show strength following Monday’s sell-off. Investors have seemingly shrugged off any inflation or delta variant concerns and are stepping back into the market. Current opportunity seems to outweigh any immediate risks. 

Surprisingly, Invesco’s Nasdaq 100 ETF (QQQ) seems to be the lagging ETF during all of this. The parabolic tech stocks have started to stagnate for once. This was the first ETF to break out of its previous all-time highs and the least affected by supply chain issues. Perhaps investors are starting to look elsewhere in the broader market for monster gains as the supply chain issues begin to resolve itself.  

The energy sector, and more specifically, West Texas Intermediate (WTI) crude oil has shown impressive gains in spite of the negative news today. Oil inventories had a total of 6.7 million more barrels in stock than what was forecasted. Despite the surplus, investors frantically bought up the commodity with the expectation that demand will continue to outpace supply. 

Investors may be moving into more tangible based companies that provide more opportunity as opposed to the extended tech sector. This trend could continue as risk factors in the broad market continue to diminish. 

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2/ Newmont Mining Looking Weak Ahead of Earnings 

With the falling prices of gold, and the Fed’s stance on inflation, the gold mining stocks are already slammed. One such stock is Newmont (NEM) which has dropped 6.25% over the past year. NEM has a weight of 18.48% in State Street’s Gold Miners ETF (GDX) and the ETF as well has plummeted over the year, losing 17.53%. The stock and the ETF started plunging in May. When compared to State Street’s Gold Shares ETF (GLD) the results are a bit similar, GLD as well has lost 2.53% over the same period.  

Newmont will announce earnings on Thursday with estimates of $0.80 per share and revenue of $3.14 billion. Newmont has plummeted from its May high of $75.31  traded at $60.31 today. The current market scenario seems unfavorable for the gold mining stocks. 

3/ Copper Prices Weigh on FCX  

Freeport-McMoRan (FCX) is an international natural resources company. The company operates large, long-lived, geographically diverse assets with significant reserves of copper, gold, molybdenum, cobalt, oil, and gas. The company will reveal its earnings on Thursday with estimated earnings of $0.75 per share and revenue of $5.75 billion. The company has a P/E ratio of 26.96 and the stock has gained 156.73% over the year. The stock moves in close correlation with State Street’s Copper Index Fund (JJC). The ETF itself has returned 41.21% over the same period. 

Recently FCX said that its Indonesian unit will not build a $2.8B copper smelter with China’s Tsingshan Holding, and instead will move ahead in building a new smelter near its existing copper refining operations in Gresik, East Java. China’s move to cut the amount of cash that banks must hold as reserves to boost its economy might be a positive sign for FCX, but the stock seems fairly priced now. 

4/ The Bottom Line 

The broader market rose today, including WTI, as risk seems to decline. Newmont has been trending down, which may not change after earnings. Freeport-McMoRan is expected to report positively.  

Originally posted on 21st July, 2021

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