During the overnight session of the U.S., which is the morning session for Asia, there was lots of talk and debate about the U.S. not labeling China as a currency manipulator and the positive implications that may be possible in further negotiations for trade talks. i.e., The “markets” just dodged a bullet and there’s now room for possible trade talks to begin and hammered out without that additional overhang.
I am not of that opinion.
I have been consistent in the belief and expression that I believe that the current moves in China’s market have not been a carefully orchestrated manipulation of its currency and markets but rather, a full on panic of throwing everything they can – anywhere and everywhere – as to keep it from imploding. i.e., The “spinning plates” (aka China’s economy, markets and currency) have long since moved past the wobbling stage and are now beginning to fall in plain sight. That is, for those willing to look or pay attention.
The currency announcement should have brought some form of stability, at least in the immediate, however, I believe that announcement is trivial in comparison to the immediate psychology for its impending effects (may take a year or less) to Chinese businesses everywhere. The announcement to end and replace the current postal agreement that has allowed Chinese goods to compete in U.S. markets via the postal service at what is basically a subsidized rate (in some cases 1/3 the price U.S. businesses have to pay) is a game changer with enormous implications: and Chinese businesses both know it – and understand it.
And, it is here I think there may be a full on panic brewing within China.
Currently they’re already beginning to see uprising in places like Hong Kong and more when it comes to real estate. I believe this is only the beginning.
Cuts in their RRR (interest rates for banks) further falling currency moves within spitting distance of the psychologically significant 7.00 cross rate of the USD/CNY along with their major markets either resting on or breaking through major technical support lines, all at the same time with: trade slow down, car sales plummeting, and on and on.
I believe China is in a full-blown panic and on the precipice of an all out market rout. I’ve been warning about this for quite some time, however, I believe we are now at that moment of time where everything once thought of as stable – is anything but. And yes, I am of the opinion that the politburo has indeed already lost control. i.e., you can hear the cracking and it’s gone from slightly inaudible to sonic booms for comparatives.
To show you just what I’m arguing, here’s a chart of China’s Shanghai Composite Index as of last night. To wit:
The above is represented by weekly intervals of bars/candles. The lower trend line goes back as far as the early 1990’s, the secondary in early 2005. Should the index cascade into the area I denoted with a circle and just bounce in there alone would bring upon massive strain. However, should the index fall in dramatic fashion and slice through that circle along with piecing, then falling below that lower trend line?
Then everything that was once considered “China’s rising” for lack of a better term, is “different this time.”
As always, we shall see.
I’ll be discussing this more on today’s show.
© 2018 Mark St.Cyr