Overnight China received more bad news, this time in the form of FDI, Foreign Direct Investment, likely because of recent clamp-downs against foreign multi-national corporations operating inside China. In any case, FDI dropped by -14% for August on consensus of a +0.8% increase or -$7.2 billion dollars for August, the biggest drop in 4 years.
Shanghai logged the biggest drop in 6 months with MSCI-Asia Pac posting the 9th decline in a row the longest losing streak since 2002.
Our recent FXP long (China FTSE 25 2x short) from last Tuesday , Sept. 9th , Trade Idea: FXP (Swing to Position Trade) Long is now up approx. +9.5% in a week.
Emerging Markets don't have it any better, on track for their 9th consecutive daily loss, the largest losing streak since Sept. 2001.
Weakness in Asia which has been a carry over from the US's weakness last Friday has spread to Europe where Scotland is set to vote tomorrow whether to declare independence. Making matters worse, the German ZEW Survey came in at a beat of consensus of 5, printing at 6.9, but down from the last of 8.6 and the lowest reading in 21 months for the the consecutive monthly decline. These are the signs that have been here all year and people will only start talking about and saying they saw the entire time well after this market has crumbled.
US Index futures dropped pretty significantly overnight, but as I suspected (and reason I waited for the open of cash markets) bounced right back to the zone in which we were seeing short term accumulation yesterday with all major US markets in the green since the open, quite a difference from overnight action, but with yesterday's accumulation not surprising.
SPX futures just before the cash open and currently...
The Shanghai Comp closed down 1.82%, Hang Seng down -.91 and the Nikkei down -.23.
At last look, in Europe the FTSE was down -.45%, the Dax -.50% and the CAC-40 -.74%.
Remember, tomorrow is the F_O_M_C at 2 p.m., as I always warn, beware of the knee jerk reaction on F_E_D events, they are almost always the wrong reaction and are retraced.
Beyond that, I suspect we'll see more accumulation in yesterday's general range and maybe even the start of a short term pop on a deeply oversold (breadth) condition, however as I have been saying, I would use any price strength and 3C weakness to enter longer term core short positions that you may like as breadth has just turned atrocious, way worse than anything I've seen in 15 years of watching these charts, worse than the 2007 market top.
This is a dead market walking and long traders are whistling past the graveyard (although I do like select longs).
We'll get to some more trade set ups, but I'd hope that we are largely already in position as we have had a long stage 3 to prepare.
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