I'm Eyeing These 3 Chinese Stocks as the Bulls Lead Us Out of September
China unleashed stimulus that could create opportunities in several names; U.S. earnings season will kick off soon; and then we'll then look toward the next Fed meeting.
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Although conditions in September were strong for negative seasonality, the bears were unable to close the deal. The half-point Fed interest rate cut failed to produce the sell-the-news response that many bears were anticipating, and the bulls have remained optimistic about a "Goldilocks" economic narrative of a soft landing and lower inflation.
We do have signs of a slowing jobs market and more restrained consumer spending, but the hope is that the Fed will deliver another half-point in cuts again soon, and help prevent any significant slowing.
Technically, the S&P 500 is still hovering around its highs and is extended, but rotational action under the surface is helping some individual stocks to develop better charts.
The "Magnificent Seven names" tech stocks are no longer the primary leadership, although they were go-to names at some of the recent rallies. Nvidia NVDA has been exhibiting relative weakness, but Tesla's TSLA strength has helped to offset that action.
The giant surge in China's stocks due to unprecedented government stimulus has complicated things for the bears, as well. The Chinese government has created a flood of liquidity and sent the nation's entire market sharply higher, the question still remains whether China can avoid further economic weakening in the months ahead. Stimulus doesn't necessarily fix the main underlying economic problems that have been building in China for a very long time.
Big-cap China names led the explosion last week, but now speculative traders are moving into the smaller names. The hunt is on for undiscovered Chinese names that may play catch-up.
Big-cap China names led the explosion last week, but now speculative traders are moving into the smaller names. The hunt is on for undiscovered Chinese names that may play catch-up. Names like UP Fintech Holding TIGR, NIO, Inc NIO, and ATRenew (previously called AiHuiShou International) RERE are shooting higher early on Monday morning.
It is the last day of the month, so we will likely see some window-dressing and positioning moves. Earnings season will kick off in a couple of weeks and the market will start to anticipate the next Fed meeting as well.
The bears have been very frustrated with this market, but keep an eye on price action and be ready to make some moves, if support levels are tested. I am still holding very high levels of cash as I search for good technical setups.
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At the time of publication, DePorre is long NVDA, RERE.
