The recent outperformance of China appears to be over. Despite the rally yesterday in the US, Shanghai was down 1.4%, and the H-shares were down even more. All signs point to eventual monetary easing in China, as interbank rates have been low, and it seems like PBOC will try to solve popping of the credit bubble by printing money. Under this scenario, the Chinese yuan will be devalued. With the devaluation of the yuan, there goes the theory of rebalancing from investment to consumption.
We got the bounce yesterday, and there is possible upside to ES 1834, but that is only 6 points away as I am writing. Don't want to play any shorts too aggressively here, because there is not that much downside. Also, I don't want to be short ahead of the long weekend. So if I do enter a short this morning, it will be small, with the intention of covering within 2 days.
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