Nov
24

China Meltdown

The American websites are discussing the GDP revision down to 2.8%. The news story that has not yet hit US markets is the 3.5% drop in the Shanghai composite. It is being ignored right now (8:38 ET), but I’m not so sure it will be ignored the entire day.

Chinese stocks fell their furthest in almost three months on Tuesday as investors took profits amid fears that banks would be forced to sell shares to raise capital.

Source: Financial Times

We also have Case-Shiller and Consumer Confidence before the open at 9:00 ET.

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The overnight range is 1099-1107. When you combine the low volume with the economic reports, I expect that we will see volatile trading.

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  • Hey CC, the past week's action looks like the Markets are finally trying to rollover. But they also looked like that about 3 times since March, and each time failed. It seems we've started a new trend, perhaps only flatter climbing? So, I'm wondering if these low-volume declines are due to the algo's taking the week off to spend time with their programmers?
  • We're actually seeing some cracks this time that we have not seen yet this year.

    1. Short term treasury yields at 0%
    2. USD approaching 2008 and long term support levels. The article I cited yesterday says Europe's max tolerance for the Euro is 1.55:1. At 1.50 now. UDN trendline already broken (October).

    3. Divergence between small caps (IWM) and large caps (DIA, SPY)
    4. The all time high club - AAPL, BIDU, IBM and BLK are stalling
  • Excellent points. I'm still petty new at this, but I kept thinking I saw "signs" on the way up, but it just kept going. Although we're now at the long-term down-trendline that goes back to the 2007 peak, and the rising wedge has broken, I could see how a reversal might happen.

    So then the question becomes, is it consolidation or continuation of the LT trend? And how should we play it? Short gold? Buy FAZ? Buy foreign currencies or ADR's? Stock picking those individual equities that don't follow the S&P trend?

    I've considered getting some UUP, maybe shorting FXY and playing a little TMV.
  • You'll see in my prior posts that my plan is simply to trade one major ETF. I'll start with a small position and if the market moves in the direction of my trade I'll keep adding to it. Everything is so correlated. I don't think there is a need to "diversify" among correlated securities.
  • Cool, sounds like a nice, simple approach. I'm really liking these ETF's for trading vehicles.
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