Pick Your Asset: Silver, Oil, Tesla, or Bitcoin

• The end of a year always brings outlooks and discussions of investment opportunities for the next 12 months.
• I took part in Barchart's poll looking at four such markets: Silver, Oil, Tesla, and Bitcoin.
• The common theme of this four (and many others) is that long-term trends either have turned up or look to be in the process of turning as December comes to end.

My friends at Barchart posted an interesting poll on Twitter Thursday evening. The question was, “Which asset will generate the largest return in 2023?”, with the choices being: Bitcoin, Tesla, Silver, and Oil (as in crude, either WTI or Brent). Given this is the last trading day for markets (excluding Bitcoin, which never stops), I thought it a good subject to discuss as we wait for Friday to end. To set the stage, as usual when I’m talking about investment markets, I’ll be looking long-term monthly charts for the four assets in question. In commodities the ideal is to look at cash prices (or intrinsic value) of the markets. 

A look at the monthly chart for a cash silver index (SIY00) shows the market to be in a major (long-term) 5-wave uptrend. This move began with the completion of a bullish spike reversal during September and has already seen the market gain 38% in value of that month’s low near $17.60. Characteristically, silver is considered a hybrid between precious and industrial metal, the former linking it to the strength/weakness of the US dollar while the latter has it acting as an economic indicator. From a technical point of view, the SIY00 has already completed a 50% retracement of its previous long-term downtrend, setting the stage for a Wave 2 selloff. Given that, the market could fall 3 months against its trend, meaning the first quarter of 2023 could see the SIY00 fall back to the $21 to $20 range before rallying again. Eventually, cash silver could reach $27 for a 2023 gain of about 13%. 

The continuous monthly chart for spot-month crude oil ((CLG23) is a bit more difficult to read. While I still see a major downtrend, the worm could still turn if it pulls off a close above the November settlement of $80.55 as December comes to an end. Similar to the September pattern in cash silver, this would complete a bullish spike reversal indicating the major trend has turned up. Fundamentally the market is not as bullish as it was earlier in the year with the first couple futures spreads slipping into contango after spending most of 2022 in backwardation. This tells us the world is adjusting to the new supply and demand dynamics caused by Russia’s invasion of Ukraine. If the market closes near $80.50 this month, with a new uptrend target roughly $117.50 it would imply a 2023 gain of 46%.

Tesla (TSLA) is a classic case of a meltdown caused by a number of factors. To begin with, the stock became grossly overvalued (according to analysts who track such things as Price/Earnings ratios) during the heady days of the 2020-2021 rally. Add to that the level of anger aimed at Mr. Musk for his purchase of and actions surrounding Twitter, and the stock has lost 33% of its value since the November 2021 close of $381.59. However, it’s this move that has quieted most of talk about Tesla being overvalued, with Mr. Musk still claiming his company (not named Twitter) will be the most valuable in the world. While I’m not a huge fan of Mr. Musk, from an investment standpoint I still see Tesla as the leader in the booming electric vehicle sector. I also see the three major US stock indexes having established long-term uptrends, and Tesla is included in both the S&P 500 and Nasdaq. If the Dec close is the low of the downtrend (approximately $122), and Tesla does nothing more than retrace 33% of its loss to $207.54, it would still be a gain of 70%. 

As I’ve talked about before, I’m not a fan of Bitcoin ((BTCUSD), a fact that likely clouds my judgement of the electronic/imaginary crypto currency. That being said, Bitcoin is holding above its November low of $15,516.63 (US dollars) as December nears its end. To equal the potential 70% gain of Tesla, Bitcoin would need to climb to almost $28,000. Is that possible? Certainly. Given Bitcoin is an unregulated market for pirates, anything is possible. A look at the monthly chart shows this would equate to roughly a 23.6% (Fibonacci) retracement of the ongoing major downtrend. I say ongoing because as of this writing I do not see a reversal pattern forming. And even if I did, I might pretend I didn’t. 

More Stock Market News from Barchart

• Markets Today: Stocks Retreat as Global Bond Yields Climb
• Selling Covered Calls On The Dogs Of The Dow Stocks
• Pre-Market Brief: Stocks Mixed As Brutal Year Nears End
• Stocks Rally Broadly as Bond Yields Fall