China is really falling apart!
The Shanghai Stock Exchange dropped another 3.5% today to finish well-below 3,000 at 2,900 – ending at the low of the day. That puts the index officially in bear market terrory (again), now 20.5% off it's December 22nd high of 3,651. The latest fall in China’s stock market followed a state-run media report that some Chinese banks were no longer accepting stocks as collateral for loans. At the same time, official data also showed weak demand for bank loans.
It doesn't matter if it's true or not – what matters is people are in the mood to panic – so it doesn't take very much to start a stampede – as we saw yesterday when our own markets stampeded up for the same no reasone they stampeded down the day before and now our Futures are down 1.5% on a combination of China concerns and now the 5% drop in oil we're seeing as that sector panics over Monday's release of Iranian oil – which will add about 500,000 barrels a day of unneeded oil to the already saturated markets.
We extensively discussed oil and other commodies in Tuesday's Live Webinar for our Members (replay available here) and I explained why it was not done going down at the time, so I won't re-hash it here but we are finally getting to the point where we might take a long poke on the Ultra-Bullish Oil ETF (UCO), which is now under $8, not much below USO, which is now under $9. We'll keep an eye on that in our Live Member Chat Room next week.
Speaking of keeping an eye on things – you are very welcome for yesterday's call to go long the Russell at the 1,000 line (and yes, we did it again this morning). One of the huge benefits to having cash on the sidelines is we have plenty of margin left over to play the Futures and make these quick in and out trades – without having to risk the overnights.