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Two Ways to Play: China Surprises Global Markets


Strengthen your portfolio in good times and bad.

Chinese Surprise

China surprised the global markets this morning by ordering a 50 basis point increase for bank reserve requirements.

Stocks and commodities dipped on the news as the world's third-largest economy tries to reign in on bank lending and slow rising inflation.

According to Reuters, the largest banks now face a reserve ratio of 16.5%. Investors were expecting an increase in the reserve requirement but not so soon.

Equities fell in Europe as well as US stock futures. Gold dropped as much as $15 dollars per troy ounce to 1079 but has since recovered to 1085. For more context on China, see Professor Keith Fitz-Gerald's How to Profit From China's Next Move.

From the Bull Pen: The dip in Asian stocks may be an entry opportunity. There's typically a retest of the low after a stock has bottomed. Consider (CTRP), a Chinese travel and service provider. One can fade (read: buy) into the weakness; a sell stop can be set below $30.

From the Bear Cave: For bears in the US markets, consider the ProShares Short S&P 500 (SH). Watch for a late-Friday rally especially ahead of a three-day weekend. If it doesn't come, it could mean there's more supply ahead for next week. Sell stops can be set 2% below entry.

For more ways to play and other trading ideas from more than 30 top market pros, take a free trial to our Buzz & Banter.

A Quick Check Around the World

Asian trading closed with the Nikkei 1.29%, India (Closed), Hang Seng -0.11%, Shanghai 1.09%, and Taiwan 1.10%.

Across the pond, we see the FTSE -0.49%, CAC -0.05%, DAX 0.05%

As of 8:22 AM EST, S&P Futures are trading -8.50 to 1068.00. Nasdaq futures are -13.0 to 1762.50.

A Look at Commodities

Over in commodities, crude oil is -9.80 to 73.84 while gold is -10.00 to 1084.70 this morning. Silver is -0.210 to 15.385 and copper -0.0705 to 3.0625.

The dollar Index is +0.0530 to 80.6300.

On the Radar


08:30 Retail Sales 0.4% cons.
08:30 Retail Sales ex Auto 0.4% cons.
09:55 Michigan Sentiment 74.8 cons.

Good luck and have a great long weekend!
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No positions in stocks mentioned.

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