The China Factor
 
Three charts to view this week for perspective on the general market condition. 
 
Looking back to late 2008 and first quarter 2009 sentiment was terrible and extraordinary measures were being taken by central Governments worldwide to force liquidity into the financial system. 

Together with the fact markets were already massively oversold after the panic sell off in most asset classes (except notably the US Dollar and US Treasury Notes), an equally large rally was triggered by March 2009, again, in those asset classes that had been decimated during 2008. 

Fast forward a year and the rally has just perhaps run out of steam.  Looking at the chart of base metal, Copper, in perspective this market has doubled in price in a little over a year, it is due a pause at the very least and is showing in the last few weeks signs of wanting to begin to turn lower.
 
China who had been buying up commodities and restocking at bargain basement prices, while rolling out a stimulus programme for its own economy has in recent weeks been quietly raising bank reserve requirements and effectively ‘tightening’ their financial system. 

Checking the technicals on the Shanghai Composite ($SSEC) shows that price is trailing along the 200 day moving average – a key level than if price trades below for a period of time will indicate a bias towards lower prices on this stock index – and with all probability, the US and UK indices are likely to follow – regardless of assurance from Ben Bernanke at the US Federal Reserve at rates will be kept low, ‘for an extended period.’ 

The US S&P500 index is hovering just under its 50 day moving average and may well be contained to the upside by this key indicator.  Something to watch.
 
 [3 charts to attach] copper, SSEC and SPX in that order

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