As a market participant, I had to get used to this.
My golf buddies have been promising me the end of the world for years now. Some of them even have special food for it.
My Florida man neighbor is absolutely convinced that Jerome Powell heads a top-secret underground society of the world’s wealthiest individuals.
This is the kind of crazy that pollutes my eardrums almost every day. I’m numb to it. I’m barely listening at this point.
But there is one word that really moves me. It always catches my attention.
Uninvestable.
When they tell me something is uninvestable, I really perk up. It’s music to my ears.
I remember when crypto was uninvestable in the winter of 2022. Solana was in the single digits. It’s up like 1,300% since.
Who remembers the uninvestable stocks from last year?
2023 was a bad one for the banks. Bank runs. Contagion. Balance sheet problems. Government bailouts…
“You can’t own these stocks!”
Like crypto the year before, this was the wrong advice.
JP Morgan and Goldman Sachs have been making new all-time highs all year.
The SPDR Banking ETF $KBE is up about 65% from its May 2023 lows. As it turns out, the banks were pretty damn investable after all.
I call it disaster sentiment. It comes with a lot of the best bottoms.
So, what are the uninvestable stocks right now?
It has to be China, right?
China is giving us some of the most obnoxious initiation readings I’ve ever seen… kicking off a new bull market with a bang… and they are still telling me about how bad the CCP is.
When I tell them a new uptrend is underway for China’s largest company, Tencent, they’re still telling me stories about how Jack Ma went missing.
And we haven’t even discussed the commercial real estate situation…
The bottom line is there is nothing but scary stuff coming out of China right now.
Investors have been fleeing from these stocks for years. The MSCI Emerging Markets weighting to China has fallen from 40% back in 2020, to 24% today.
The best sentiment is as clear as day. Sometimes, it’s so obvious you join the crowd and miss the signal. It’s blatant.
And the best part is that it always tends to come at extremes. Disaster sentiment goes hand in hand with inflection points in the market.
Like the massive primary trend reversals that are printing for Chinese stocks right now.
So, who do you trust?
The journalists and pundits, or the charts?
Let’s talk about some stock specific sentiment from China real quick because there have been some real gems there too, lately.
Here’s JD.com, the Chinese online retailer.
The stock is up 50% since last week, and is trading at its highest level since Q1 of 2023.
JD came public in 2014 and was included in the exclusive Nasdaq 100 club starting in 2015.
Late last year, while the stock was in the process of bottoming following an 80% drawdown, they finally gave it the boot.
After 8 long years, they kicked JD out of the Nasdaq 100. Selection committees adding and cutting stocks from indexes is some of the coolest sentiment data we get.
The Nasdaq is not unique in this way. Fading moves by the Dow Jones committee is a trick as old as time.
Then, we got another great signal back in August when Walmart capitulated on its long-term equity investment in JD.
They owned a roughly 10% stake, worth several billion, and had been invested since 2016. They sold the entire thing. They had enough.
Unfortunately for Walmart, a new uptrend is underway for JD and Chinese stocks more broadly. In fact, we think it's all Southeast Asia. And not only that, but it’s being served with the kind of sentiment we only see at major market bottoms.
I’m all in on China. Are you?
Steve
JC Parets is going live to reveal the top 5 charts you need to see for Q4.
