When it comes to properly assessing China's stock market, are
financial experts bad or just blind? Here's what they've been
Buck the Trend, Buy Chinese Stocks - Forbes, Jim Oberweis,
Huge Reforms in China Could Lead to Big Upside for Top
Chinese Stocks - 247wallst, 11/19/13
It's Time to Buy China - MarketWatch, Jeff Reeves,
Chinese Stocks: Huge Growth and Room for More - Motley
While pundits continue trumpeting Chinese stocks and "cheap
valuations" as a buying opportunity, we've alerted our readers and
subscribers to do the exact opposite. Our dashboard of indicators
have and are being confirmed by bearish price action. Simply put,
the economic climate in China, along with its BRIC (NYSEARCA:BKF)
peers, is deteriorating and Chinese stocks (NYSEARCA:GXC) will get
worse before they get better.
After issuing a 12/6/13 buy alert on ProShares UltraShort FTSE
China 25 ETF (NYSSEARCA:FXP) at $58.60, the ETF Profit Strategy
wrote: (FXP aims for double daily opposite performance to large-cap
"From our vantage point, the prudent investor has two better
choices: 1) Aggressively short Chinese equities, or 2)
Aggressively avoid them. Right now, market prices are saying the
Chinese stock market will get worse before it gets better. That
means if you're the least bit bullish on Chinese stocks, you best
wait for lower prices before plowing in for the long-run."
On Feb. 10, we sold the final leg of FXP
at $75.50 for a blended two-month gain of 23.5% and our still open
tandem options trade is now up 62% since our 1/9/14 entry. The
short China (NYSEARCA:YANG) trade has been the right place for
The People's Bank of China is trying to keep its real estate
market (NYSEARCA:TAO) and financial system from imploding. The PBOC
has resorted to novice tactics like making Saturday night
announcements - while people are out of the office - that it will
peg the yuan to a range of 2% above or below a daily rate versus
the U.S. dollar. Press releases issued on the weekend are the
first thing that 22-year old PR interns learn.
China is a global leader in bribery and corruption and it now
among 177 countries, according to the 2013
Corruption Perceptions Index
. With an embarrassing score of just 40 on a scale of 0-100, China
ranked lower than Brazil, India, Russia, Turkey, and even
Venezuela. Only Central Asian "Stans" and Sub-Saharan Africa
outpace China in brazen fraud.
The upcoming Alibaba IPO which is expected to give the
Chinese-based e-commerce giant a $140 billion market cap, is just
another well-crafted distraction.
China's unfolding credit crisis has yet to hit full stride and
there's scant evidence of capitulation selling in Chinese stocks
(NYSEARCA:FXI), which would be the sign of an imminent bottom. For
patient and opportunistic investors an opportunity to go long China
will arrive - but not until stock prices have first hit their
"margin of safety" zone. Are we there yet?
The Shanghai Composite over the past four years shows a
descending chart pattern of lower highs. Although the downtrend
subsided when the index hit 2000, each of the last three bounces
has resulted in a lower high with the downtrend performance still
Profit Strategy Newsletter
follows China along with other key asset classes using technical,
fundamental, and sentiment analysis along with market history and
common sense to keep investors on the right side of the market.
In 2013, 70% of our weekly ETF picks were gainers.
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