Chinese stocks continue to be under heavy selling pressure, closing down another -2.8% overnight, taking the Shanghai Index down to 2931, which is -54% from the October 07' highs. When we read the South China Morning Post in the mornings, we continue to observe local Chinese sentiment as nothing short of alarming.
I do not see any support for this Index until the 2759 line, but that's really focusing on the tree. The forest remains what big news is this stock market discounting? Since the Chinese clearly have inside information that most US centric investors do not, we need to be focused on this question, particularly ahead of the Olympics in August.
In my investment models, managing risk is about managing tail risk. We are not in the heart of the bell curve of normal distributions here anymore. China's stock market crash is signaling a major problem, and we have our Eyes on it.
(chart courtesy of stockcharts.com)