Overnight Chinese Stock Market Action could signal top in Global Equities

Dow Jones down 15 points yesterday, 18/30 Dow stocks down. The leaders, all up by more than 1% were BA, BAC, GE, MSFT and VZ. Laggards, each down by more than 1% were XON, PFE and AXP.

China markets down 5% last night on fears that Chinese stock market has entered a bubble stage. Major Chinese indices are up more than 90% year to date but still down more than 50% from their all time peaks. Fear is based on hyper demand for Chinese IPOs this week. Sichuan Expressway, tripled on Monday on its first day's trading. The stronger-than-expected debut for China State Construction Engineering Corp's $7.3 billion IPO, by far the biggest IPO on the planet over the last 12 months showed China's booming markets are drawing investors, but it heightened concerns about a speculative stock market bubble forming because the 5% reversal followed a speculative blow off in stock prices.

Comment: Investors should proceed with caution as because the action of the Chinese stock markets are reminiscent on what happened to the NASDAQ after it peaked in March of 1980 at 5000 before falling by 79% to 1100. Much of the global rally in stocks since March of 2009 has been attributed to China and its economy. Should its stock market get clobbered it will take the rest of the global stock markets with it.

http://www.cnbc.com/id/32195646

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