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How Shanghai Weakness Impacts S&P


In the aftermath of the 2007-2009 banking crisis bear market in global equities, the first market to reverse (Oct. 2008) -- and the first one to peak -- in the near-vertical advance thereafter was the Shanghai Composite.  The China index hit its high at 3482.50 on 8/05/09, up 109% from 1664.93.

That said, it has been declining ever since, and has relinquished 72% of its bull-market run.  The Shanghai closed at new "correct- ive" lows today, heading for next support at 2100-2090 in the aftermath of its breakdown from a major top, confirmed last week upon its break of 2320/15.

What exactly that might mean for the S&P 500 is something to contemplate, and in general, Shanghai weakness cannot be positive for US and global equities.  This is especially true if China market weakness is a function of an anticipated, impending hard economic landing.

That said, the SPX continues to exhibit strong relative performance vis-a-vis China, and will continue to do so as long as the SPX does not break its Oct-Dec support line, now at 1190.

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