HSBC Chinese Flash PMI Not Good

Last night it was Japan's Trade Balance coming in worse than expected, tonight its HSBC's Chinese Flash PMI that just came in at 47.8 vs 49.3 from July. This is the worst print in 9 months and of course, below 50 so China remains in contraction. 

There are 11 sub-indicies in the data, all were weak. In line with the Japanese Trade Balance, China's New Export Orders came in at 44.7 which is the lowest print since March of 2009.

Keep in mind this is HSBC's Chinese Flash PMI and not the official Flash PMI, but because of China's opaque political system, the HSBC number usually carries its weight. Typically on a bad report like this we'd be hearing rumors of a Chinese RRR cut or some sort of stimulus, but considering food and energy inflation in China and the fact they have been conducting reverse repos, the opposite of easing in trying to get a handle on inflation, easing is pretty much out of the question.

Here's how the data has effected the market thus far...

 ES remains in a persistent  negative divergence, we've only seen this a couple of times this year and each time was right as the market as making a major reversal to the downs side. ES did gain after the market closed, but in the white box you can see the reaction to the Chinese Flash PMI.

 The EUR/USD has a minor reaction, the biggest reaction was to the F_O_M_C_ minutes at 2 p.m. in red.

The $AUD being much more sensitive to China did see a bigger reaction in blue, the $AUD also happens to be an excellent leading indicator for the market, a move down in the $AUD is not good and it's been underway for more than a week. We'll see how the market digests this information.

We did have the positive divergences in the market averages today suggesting a move up, even though we saw some deterioration in them. I couldn't find any real confirmation, Treasuries were positive instead of negative as they would normally be, Volatility remained positivie when it would normally be negative on a market positive divergence so there's a lot of movement out there. I would still be looking to short in to price strength as the underlying weakness remains if we get the chance.

* Remember as I posted earlier, I have a doctor's appointment tomorrow morning so I'll hopefully be back by 10:30 -11 a.m., if you could send your emails around that time (if they are market related) it will likely save me some time in getting back up to speed when I get back.

See you tomorrow.