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Two Ways: Chinese Markets Hit Brick Wall


Strengthen your portfolio in good times and bad.

Shanghai Slumps

The Shanghai Composite led Asian markets to the downside, plunging 5.8% overnight, the largest drop so far for 2009. The biggest victims in last night's drubbing were metal stocks as lower commodity prices, and worries over weak economic data and tightening of bank loans weighed on investors, according to The Wall Street Journal.

China's Angang Steel and Yunnan Copper fell by the maximum 10% limit. The selloff also coincided with a report that direct foreign investment slowed in July, dropping 35.7% to $5.36 bln from a year earlier. For the first seven months of the year, foreign direct investment flows were down 20.3% compared with a year earlier.

For context, see Professor Branden Rife's Three Reasons to Think Twice About Chinese Equity.

From the Bull Pen: For bulls, this may be the pullback everyone has been waiting for. Freeport McMoRan (FCX) may be an opportunity. One can consider starting an initial position near $60 and add on weakness toward $55. A sell stop can be set below that level.

From the Bear Cave: Bears are pressing today's weakness in the S&P 500 using the depository receipts (SPY). But be prepared for shorts covering at gapfill (97.65). One option is to cover half the position near that level and reload on later strength. A buy stop can be set on a close above recent highs (100.79).

Quick Check Around the World

Asian trading closed with the Nikkei -3.10%, India -4.07%, Hang Seng -3.62%, Shanghai -5.79%, and Taiwan -1.95%.

Across the pond, we see the FTSE -1.84%, CAC -2.44%, DAX -2.17%.

As of 8:10 AM EST, S&P Futures are trading -20.5 to 985.50 and Nasdaq futures are -33.0 to 1582.25.

A Look at Commodities

Over in commodities, crude oil is trading -1.48 to 66.03 while gold is -11.20 at 937.50 this morning. Silver is -0.592 to 14.13 and copper -6.900 to 276.70.

The dollar index is +0.5550 to 79.5600.

On the Radar


08:30 Empire Manufacturing 2.20 (cons)
09:00 Net Long-Term TIC Flows $17.5b (cons)

Click here for the full trading radar.

Welcome back, Minyans. Good luck!
No positions in stocks mentioned.

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