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If you’ve been following Chinese stocks (the top destination of lots of global capital these days), you’ll know volatility has been expanding as price has been rising. Even the recent consolidation has seen volatility remain elevated and expanding on today’s breakout.
In China, the prospect of the next round of stimulus is the exclusive driver for equities. Printing money, easing policy, and lowering reserves are all part of the glorious Astroturf agenda for CCP central planners.
Contrast this with American Treasury Secretary Scott Bessent’s comments over the weekend; his remarks reflect a U.S. policy headed in the opposite direction.
Now, you would think that austerity and more conservative financial largesse would positively impact the U.S. dollar, but it hasn’t – at least for now. However, the next leg lower in the U.S. stock market may come as the dollar begins to surge and drives correlated selling.
For today, any indication of the USD strengthening and the Chinese yuan weakening on stimulus news is in the background… and waiting for its turn to see the yuan devalue.
For now, the options market is seeing very positive prints and China may be ready for a big week.
Here’s what to do about it from right here in the US of A…
