As I type this the entirety of the media is focused on bringing stories of how the President is only focused on the “markets” and will do anything to “make a deal – any deal” as to not allow them to slip ever-the-further downward.
The implication of this is, of course, that the Chinese negotiators have all the power.
So with that in mind let me ask you to consider another, using what Silicon Valley likes to call a “picture.” Because if a picture says a thousand words – than a chart can show Trillions of potential losses. To wit:
The above chart is of the Shanghai Index, which for comparative purposes, is the Chinese version of our S&P 500™. The candle/bars are representing monthly movements and the time frame is from the year 1991 to the present. So, in theory, what you have is complete representation of China’s market and manufacturing assent that culminated from the time since Nixon went to China (e.g., 1972).
The reason why the above is important, from a technical perspective, is that they (China) are dangerously close to breaking major support levels. And these levels are far closer, and have far more relative meaning to their markets than the U.S., i.e., Let’s say using for example a U.S. market rout dropping or going back to 2016 levels, just for a comparative note.
Should the first support level I highlighted be broken and the upper shaded area be entered? I believe that a market rout, the likes that will shake the politburo to its core, may be on deck. And yes, this will reverberate and have major consequences across global markets. But I believe China will be the far greater recipient of any of said “hurt.” (I would also look for initial signs of panic such as large moves in currency devaluations and more.)
Should this happen and the second support level or trend line be violated and that lower or second shaded area be entered in any way shape manner or form? The potential for not just a Chinese, but a major global market melt down could be at hand.
Please note (for it’s a pretty big point): There is NO tertiary or third line – only two.
The reason why that’s important is this: it implies (or signals) there’s no other forewarning type line to watch for like there are in so many other cases. i.e., Your first line to cross is a causation event – not a cause to watch for further clues.
Remember, this is all my conjecture, for there is no Holy Grail. However, with that said, from a technical perspective, it’s pretty textbook for calling attention where attention should be paid.
As always, we shall see.
© 2019 Mark St.Cyr