It's time for Congress to act.
Not our clown show of a Congress, silly, I mean The National People's Congress of China where 3,000 elected officials will unanimously vote to agree with President Xi Jinping. What's more important is what Foreign Minister Wang Yi has to say about trade relations and possibly Donald Trump, who has used China as a whipping post in his rhetoric without, so far, much response from China.
The People's Congress will set targets for economic growth and budgets and China recently was rocked by a budget scandal in Liaoning Province (rust belt) that has forced them to admit that yes, they have been faking their economic growth data (as we've been saying for years). Given that this is now on the table – it's possible we will see a downward revision in China's GDP targets for the first time – ever.
Also on watch will be the size of China's budget deficit, which, like Japan, is approaching 250% of their GDP. It will be difficult for China to control their deficit and fund promised infrastructure spending but perhaps they have learned from Donald Trump that you can just pretend you are going to do both. Unfortunately, that may not work in China – because people there understand math!
There will be no quick answers to these questions, the NPC usually runs close to two weeks and, interestingly, they should be done right about the same time the Federal Reserve (our ruling body) makes it's official rate decision on March 15th. Janet Yellen speaks today and, as noted yesterday, the Atlanta Fed slashed their GDP forecast by 28% to 1.8% for Q1 and that was, finally, enough to shock the markets out of making another new high – giving us the worst day of 2017 (so far).
We had a fun trading day yesterday as the Dow Futures (/YM) shorts we featured in Wednesday's Live Trading Webinar (replay available here) at 21,110 dropped all the way to 20,950 for a gain of $800 per contract – just enough to get us out…