I consistently mention China and the trouble that it could unleash across the global “markets.” The reason being, should there be any misgivings in regard to how the politburo handles its ever evolving, ever-growing shadow banking and finance schemes the ensuing fallout could be, for lack of a better word, let’s just say, epic.(i.e., Much I like I warned throughout 2014 which culminated with China turmoil resulting in bringing all three U.S. futures markets to go “lock limit down” in 2015)
The reasoning is simple: There are literally magnitudes higher of potential volatility, as well as potentially destructive chaos with global implications, than what initiated the first chain reaction for financial mass destruction in 2007-08 that begat what we now know as the Great Financial Crisis. And no, I’m not trying to be hyperbolic.
In other words, China’s potential for financial meltdown is not only, by far, more disruptive. But (and it’s a very big but) it is also far more volatile and currently so. The only reason why there is any semblance of “control” now taking place is, because the politburo will either, 1) Not let it be reported. And, 2) Desperately change rules or laws, on the fly, to quell any panic. And if that doesn’t work? Arrest and detain anyone they feel may say anything other than “Things are just ducky!”
The latest example of this was on display right before, as well as during, the most recent conclave of China’s Party Congress. i.e., Any and all bad or concerning news about any and all business reporting was not allowed by decree. That’s what doing business in a communist regime is truly like.
Logically, that would also imply, or one could infer, that there’s a flip side, as in: All, or any “good news” would be deemed “just fantastic!” and would be unleashed into the Chinese markets with a furor to celebrate the now written into the Chinese rolls: President Xi Jinping. Cementing both his place in history, as well as what he supposedly now represents (i.e., China’s business and economic wealth and stronghold on the global stage) into China’s history books for the ages.
The result? I’ve mentioned it many times over the last few weeks with one expression that seems to fit. e.g., (cough cough Hang Seng cough cough.)
But today I would like to leave you with a “picture” as they say in Silicon Valley, aka a chart. To wit:
The above is a chart representing the Hang Seng index (The Chinese equivalent of the U.S. Dow) using daily intervals. There’s a lot of worthy warning signs within this chart via a technical analysis viewpoint. But for right now I have highlighted one that has really caught my eye in conjunction with the further, recent events within China, as well as abroad.
Just as I have highlighted similar things concerning U.S. indexes, this one, has the potential for creating far more seismic waves than most others combined. Hint: Here’s just one quick reminder back only in 2016 of just how fast things can change in China for those suffering any memory loss.
With the U.S. “markets” already operating in holiday mode, any overnight disruption in China’s markets, along with what may be brewing in unison in Europe, it all feels like a tinder-box in search of a match. All I’m saying in regards to all this, is this: This is one of those periods, once again, that all eyes should be where it seems the mainstream financial/business media cares not to even recognize, let alone look.
As I always say, “If you’re in business, you can’t afford not to. Period.” Because remember…
Unlike Vegas, what happens in China, won’t stay in China.
© 2017 Mark St.Cyr