Asian shares are still struggling on Wednesday as it begins to dawn on investors that the Chinese economy really is slowing. The implication for that is more deflation in commodities as they have accounted for nearly 50% of the purchases of commodities these past few years. As with respect to world total GDP. China has also accounted for nearly 50% of all growth making up for the dismal growth in Europe.
Investors are starting to fear that even fresh rate cuts in China will not be enough to stabilize its slowing economy and thus, stem the tide of the collapse in Chinese share prices. As we stated, the charts are different in Shanghai index warning that new lows are clearly on the horizon.
Much as the decline in Japan unfolds, every attempt to rally saw China’s key share indexes smacked back down by waves of selling. This illustrates the overall investors’ view that the far more aggressive support is needed from the government and the central bank to hold the market. If China is wise, they will not follow the route of Japan. The sooner the blood-letting is allowed to unfold, the sooner the trend will be concluded.
In the USA, we still see Monday’s low as critical as well as this week. A breach of this week’s low warns of a maximum decline of about 5000 points from the May high on the Down so that would bring us into the 12000 zone. The critical number that we will have to watch for the closing of the month on the 31st will be 15550. If we close below that level, this will warn that indeed we may be looking at an October low.
Additionally, critical support for the Dow (big money) lies at 15961. If we close beneath that level, this too will warn that support below is starting to yield and a steeper decline is likely down to the 13900 area. We see about a 2000 point gap. We would NOT expect that is a couple of days. It would most likely become the target for an extended decline into October with the extreme target in the mid 12000 zone.
by Karl Denninger
The Shortening Timelines
Be very ****ing careful.
That’s the short version.
Timelines have become compressed to an unbelievable degree, and liquidity sucks. HFT is responsible for most of this, I suspect, but it portends very bad things in the near future for the markets — and ultimately for the overlevered economy and business as well.
Don’t let anyone tell you business has “de-levered.” That’s a lie. Non-financial corporations have record debt outstanding.
And why not, when you’re basically getting paid to borrow?
It gets worse when you start looking at off-balance-sheet obligations such as firms like Netflix have — far worse.
How far does this go and how bad does it get?
Nobody knows how far it goes — but it can get very, very bad indeed.
How about worse than 2008 — because the systemic leverage is in fact higher among non-financial businesses and governments, while the available means of response have been basically exhausted.
Buckle up.
Roller Coaster alert ! HFT all day today, book it. This could be ugly, get massive popcorn supply.
Denninger’s original article alludes to this: http://www.reuters.com/investigates/special-report/usa-swaps/
If it’s accurate, then there had better not be any “bailouts” when the SHTF. If the banks can “…move billions beyond the reach of Washington…” then when they implode, too effin’ bad. They’re beyond the reach of Washington, right?
Odds are it won’t matter. They’ll still get bailed out because TPTB know the American Lumpen public is too dense to understand anything more complex than a McDonald’s drive-thru transaction.
People won’t capitulate; the word has been removed from the lexicon.
Without capitulation, there can be no bottom. There are definitely waves of rally, massive waves, making anyone who tries to trade this very sea-sick.
All the ingredients are here:
– only fools sell; didn’t you learn anything from 2000-2007 and 2007-2015?
– the Fed will “print” an infinite amount of money to prop up stocks.
– the US is the global leader; who cares about China or Japan.
– the super-elite OWN the USA. They will never let the markets crash and take away all THEIR money.
All of this was required before a massive market catastrophe could occur.
Now that it’s all present, what do you think is next?
Armstrong STILL makes the same error; he implies that the Chinese authorities can prop up their market just as did Japan’s authorities.
Props only work when the market as a whole goes along with it.
Japan’s “successes” are simply a post hoc logical fallacy. They will work until one day when they don’t. That’s not science, it’s witch-doctory.
What you may be likely to see is continuous pumps with massive amounts of money pumped in from places unknowable then dumps taking it back out to go to other places unknown.
It’s manipulation aimed at keeping the (real) major players from losing any large amount as they remove their private fortunes from the market and shift the (real) losses to the little guy, the pension funds and such not the ultra wealthy financial institutions and their even wealthier ownership.
Or I may be wrong, there could be other forces at play shaking out the numbers of those ultra powerful in a sort of internal purge of those unwanted there.
In any event, it isn’t going to be pretty for the average man on the street for the next few years.