Another rally that everyone will hate? And Chinese stocks are on the move

Though markets are hitting overbought levels (according to their RSIs), this may very well be the continuation of the bull market that everyone has hated. And the hate continues. Scan the headlines and you’ll see plenty of reasons for the market to fall over at any minute yet the markets simply keep going up. No one seems to know why. Here’s the SPX as of Feb 5, 2019:

We have little doubt that the market will bounce off of its 200 DMA and retrace a little bit (possibly down to the 2600-level) before making another run towards its old high. So look for a downfall in February. Whatever the case, we are a little bit skittish and are willing to liquidate some of our holdings to make sure we have enough cash on hand for any other bargains and, moreover, to simply make sure we’re not caught in another major down draft should we be wrong.

All that being said, CHINESE STOCKS seem to have recently found a bottom and are now making moves higher. Though both the HSI and SSEC are closed for the holidays, some of the stocks that are trading in the USA are moving higher. The three big ones are BIDU, BABA and JD (you’ll recall that we sold CALLs on JD for a $25 strike price for this Friday) :

But these other stocks, BIDU and BABA, we may very well buy some and see how much further they can go. They are looking overbought right now, but who can properly time the market? It may be that we see these stocks move up quite a bit in the following weeks.

There are number of other stocks we follow. Here is our list sorted by the most recent top percentage-gainers:

Add onto to those stocks the two ETFs we play quite often, EDC and XPP, and you’ll see that China may be one of the places to put our money this year on a strictly capital gains play. We’re still thinking of buying a few hundred more shares of JD and selling covered calls a week out as the stock price pops above the top Bollinger Bands.

Anyway, looks like EMERGING MARKETS are where the action is at these days. Watch out for a pullback as China comes out of its new year celebrations and traders and investors react to whatever they heard or misheard during the break.