• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

The most positive macro economic data point of the day came out of that really big country with a lot of people, China. Remember them?

Chinese exports grew sequentially, on a month over month basis, and shot up to +21.5% y/y in their September report this morning. This acceleration from August isn’t that surprising given that the country is no longer halted due to Beijing’s Olympic lockdown.

With a trade surplus of another $29B, the Chinese have what the rest of the world needs – cash. Sitting on $1.8 Trillion in currency reserves would be a pretty safe spot for even the likes of the antiquated Hank the Tank Paulson. Unfortunately for the USA, we may have to get down on our knees and beg for China to keep buying our bonds with that cash. If they don’t… you should have scary thoughts. The biggest asset bubble yet to pop is that of US Treasuries.

Cash is king, and the Chinese wanna be capitalists are on the prowl with it. Remember, they allow short selling now!

We are China via the FXI and EWH exchange traded funds. Our levels on the Shanghai Composite Index have been reviewed and here’s where the bullish lines are in our model:

"Trade" bullish > 2166.59
"Trend" bullish > 2512.11

This longer term chart of China should tell you one thing. There is plenty of runway here!

Keith McCullough
Research Edge LLC