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Two Ways: China Hits Speed Bump -- or Brick Wall

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Strengthen your portfolio in good times and bad.

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Chinese Fears Weigh on Stocks

China's Shanghai Composite Index dropped 5 percent last night, the most in 9 months on fears that the market was outpacing itself as well as speculation that the government might curb investments and take steps to rein in liquidity. According to Bloomberg, the Shanghai composite has rallied nearly 80% this year leading most major global stock indices. But Chinese stocks are trading at around 35.3 times reported earnings, over twice the average of emerging markets.

For more perspectives, see either Professor Vitaliy Katsenelson's Simple Math Disproves China's "Staggering" Growth or Keith Fitz-Gerald's Three Reasons Why China Will Save the Day.

From the Bull Pen: Bulls see this pullback as an opportunity and are eying the Morgan Stanley A Shares Fund (CAF). On the daily chart, see the potential bullish crossover of the 20 and 50 day moving averages. Investors can fade (read: buy) this weakness with a sell stop near $34.

From the Bear Cave: Chinese bears have had Baidu (BIDU) on the radar into $380 resistance. The stock seems like it may have run out of steam for the time being. Those playing the downside can set a tight 2% buy stop above entry.

Quick Check Around the World

Asian trading closed with the Hang Seng -2.37%, India -1.03%, Shanghai -5.00%, Nikkei 0.26%, and Taiwan -0.83%.

Across the pond, we see the FTSE 0.95%, CAC 1.75%, DAX 1.96%

As of 8.20 AM EST, S&P Futures are trading -5.00 to 971.00 and Nasdaq futures are -6.50 to 1595.00.

A Look at Commodities

Over in commodities, crude oil is trading -1.49 to 65.74 while gold is -4.500 at 934.60 this morning. Silver is -0.170 to 13.57 and copper -4.500 to 247.55.

The dollar index is +0.3700 to 79.3700.

On the Radar

Economics

08:30 Durable Orders -0.5% cons.
08:30 Durables, Ex. Transportation 0.1% cons.
10:30 Crude Inventories
02:00 Fed's Beige Book

Click here for the full trading radar.

That's it for me this week. I'm off to the beach for a long weekend. Good luck, Minyans and have a great week!

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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