Sentiment Is Dangerously High in One Falling Market

The old saying goes, we want to "buy low and sell high." But buying when shares are still falling is a dangerous game to play. Today, I'll share an example that's setting up right now... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [DailyWealth] Sentiment Is Dangerously High in One Falling Market By Chris Igou, analyst, True Wealth --------------------------------------------------------------- It's an easy trap to fall into... and a lot of investors can't help themselves. When a market falls dramatically, they feel a desire to buy shares, hoping to nail the bottom. After all, as the old saying goes, we want to "buy low and sell high." But buying when shares are still falling is a dangerous game to play. And it usually leads to losses. Today, I'll share an example that's setting up right now. One market is in a downturn... Yet investors are piling in. This is a warning sign that more losses are likely in 2022. Let me explain... --------------------------------------------------------------- Recommended Links: [Back by Demand: I Found THE ANSWER to Retirement]( I never worry about my retirement income, no matter what happens with COVID-19, politics, or the markets. My money is practically guaranteed by law. And now, a once-in-a-generation opportunity to see 700%-plus potential gains in my favorite strategy just opened again – I cut the "B.S." and [explain everything right here](. --------------------------------------------------------------- [GOLD WARNING]( If you own gold, read this warning immediately from the man who predicted the 2020 crash. "I see major warning signs. Move your money now," he says. [Full story here](. --------------------------------------------------------------- Buying right at the bottom has plenty of allure. You get to make the largest profits... And you also get the bragging rights that come with getting a big idea right. That's the bet many investors are making right now, in Chinese stocks. The iShares China Large-Cap Fund (FXI) holds a basket of China's largest companies. It's one of the easiest ways for U.S. investors to buy Chinese stocks. Importantly, FXI has been falling consistently since peaking in February. It's down roughly 32% since then. But investors aren't giving up on this market. We can see this through the total number of shares outstanding for FXI. The idea here is simple... FXI's unique fund structure allows it to create or liquidate shares based on investor demand. If folks are bullish on Chinese blue chips, FXI creates more shares to meet demand. If investors aren't interested, the fund cuts its share count in response. Today, shares outstanding for FXI are at a multiyear high. Demand for Chinese stocks has been increasing – even as those stocks crash. Take a look... The share count has been rising, despite FXI's falling price. Investors are expecting the trend to turn in their favor. But that's not likely... To see why, I looked at other times FXI's share count hit multiyear highs. This happened in 2009, 2013, 2015, and 2019. Each peak in sentiment led to losses over the next six months and the next year. Take a look... The worst of the downturns came in 2015. FXI fell roughly 24% in a year after shares outstanding hit a peak in bullish sentiment. But that wasn't the only big drop... In early 2013, we saw a similar trigger. And that led to a double-digit loss over both the next six months and the next year. Now, we can't know for certain yet if today's bullish sentiment is at a short-term peak. But it's high relative to history. Plus, if the price drop continues, those bullish investors will start to question themselves. Then they'll head for the exits. That's when we'll want to start paying close attention... We'll get more bullish on this market when sentiment becomes bearish and the trend turns around. But that's not happening yet... So as we enter the new year, you want to avoid this common pitfall. And that means staying away from Chinese stocks for now. Good investing, Chris Igou Further Reading When investors are all betting in the same direction, the opposite is likely to occur. Recently, folks fled from this global market. And history shows us that was the wrong bet... Read more here: [Investors Are Losing Confidence in One Country's Raging Bull Market](. "Nobody wants to buy at the peak of a rally," Chris says. But buying when an uptrend is strong is usually a smart bet. And we saw that setup recently in one commodity... Get the full story here: [Oil Hits a Seven-Year High... With More Gains to Come](. INSIDE TODAY'S DailyWealth Premium It's a good time to bet on this soaring sector... We are always looking to buy cheap, hated investments in an uptrend. And one major U.S. sector is lighting up all three signals today... [Click here to get immediate access](. Market Notes CUSTOMERS CAN'T GET ENOUGH OF THIS FAST-FOOD POWERHOUSE Today, we're looking at a big-name company that succeeds by selling addictive food... Longtime readers know we've highlighted the power of companies that sell products people crave, such as [alcohol]( [video games]( and [sugary snacks](. These businesses can be some of the safest bets for investors, since people will keep buying their goods no matter what. Today's iconic company is a perfect example... [McDonald's (MCD)]( is a $200 billion fast-food behemoth. It boasts nearly 40,000 locations in more than 100 countries. Folks around the world can't get enough of its burgers and fries... And even as we continue to navigate the pandemic, customers are flocking to its restaurants. In the third quarter, McDonald's posted a 14% year-over-year jump in net sales to $6.2 billion – partially driven by a nearly 13% increase in global same-store sales. As you can see in today's chart, MCD shares are also performing well. They're up 150% over the past five years, including dividends... And they recently hit a fresh all-time high. As long as people keep craving burgers and fries, this fast-food giant should benefit... --------------------------------------------------------------- [Tell us what you think of this content]( [We value our subscribers’ feedback. To help us improve your experience, we’d like to ask you a couple brief questions.]( [Click here to rate this e-mail]( You have received this e-mail as part of your subscription to DailyWealth. If you no longer want to receive e-mails from DailyWealth [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. 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