by Bob Stokes
Updated: May 30, 2017
In 2016, the prevailing sentiment toward China's economy was negative. Yet, if investors had avoided China's internet sector, they would have missed a significant advance. The whole episode teaches a valuable lesson.
[Editor's Note: The text version of the story is below.]
Let's say a financial market's Elliott wave price pattern suggests that a trend turn is nigh. Yet the prevailing sentiment supports a continuation of the current trend.
Does this apparent conflict present an investor with a difficult decision?
Based on our observations, not at all. Actually, the opposite is usually true. Extremely positive sentiment supports the start of a bearish price pattern, and extremely negative sentiment usually coincides with the start of a bullish price pattern.
For an example, let's go back to 2016 when sentiment toward China's economy was negative. Here are some sample headlines:
Besides the economic pessimism, China's main stock indexes were in a downtrend since the first half of 2015.
Even so, our July 2016 Asian-Pacific Financial Forecast showed this chart and said:
The Kraneshares CSI China Internet ETF (US:KWEB) ... briefly fell to a new low within wave E [of a contracting triangle]. Within the triangle, wave D approximately equaled 0.618% of wave B and wave E approximately equaled 0.618% of wave C, both common relationships. We are bullish on the ETF ... .
That forecast has served our subscribers well.
Take a look at this May 30, 2017 chart of the Kraneshares CSI China Internet ETF:
The price of the ETF has climbed almost 50% since our July 2016 forecast.
If you wait for sentiment to change, you'll miss out on the early part of significant price moves.
Now, the risk is much higher.
In addition to China, our Asian-Pacific Financial Forecast is now alerting subscribers to fresh opportunities in other sectors, investment categories and nations.