Is it time for the next China (FXI) growth scare? A few data points seem to lead that way. And it surely would come at an appropriate time to shake up the S&P 500 (SPY) and the VIX, which have as of late turned into one-way streets completely dictated by the Federal Reserve.
Here's the data
The indications are far and wide. Starting with the Shanghai Index, where a strong rally seems to have petered out (Source: Bloomberg):
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Then there's copper. Copper never participated in the overall party that the stock markets are having, and in the last couple of weeks it took somewhat of a hit. It now stands on the edge of a possible breakdown (Source: Stockcharts $COPPER):
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Still among commodities, Chinese steel prices also broke their recent uptrend and are now heading down again (Source: Bloomberg):
And then there's electricity consumption in China (Source: StockJockey's Tweeter Feed):
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All in all, there seems to be significant data consistent with the possibility of a China growth scare, which together with the extremely overbought nature of the U.S. markets, can certainly lead to a couple of weeks of worrying. Also important, the level of margin debt in the U.S. markets remains near the record levels established during the 2007 debt bubble - there is thus a good deal of hot money ready to leave the boat once it starts rocking.
Conclusion
Over the past days and weeks, a lot of data coming out of China (or influenced by it) seems to have aligned in a way conductive to a growth scare. At this point it seems that the whole thing is like a powder keg just waiting for a spark, and off it will go affecting the present festive mood in the U.S. stock markets, at least for a couple of weeks (or more).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
