Where There's Smoke, There's Fire

 | Sep 19, 2012 | 7:26 AM EDT
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The day rates I follow are suddenly gapping up. The shipping rates for oil are among these, as are the day rates for Baltic Freight, which suddenly jumped 34 to 697 points after a month of negatives. Copper won't stay down, either. Then there was Tuesday night's surprising Japanese stimulus, a real overload to get a moribund country moving. It's something that can only make these three sensitive indicators -- oil tanker rates, Baltic freight and copper -- go even higher.

These say to me that China's coming back. I know, I know. It's been said before way too many times. The stock market doesn't seem to agree with it, although it does feel like the dark days of huge China declines are now past. The trade war that might go on doesn't agree with it.

But there are nascent signs, green shoots, that say the bottom's been put in.

Think about last week's comments from Mike Sutherlin of Joy Global (JOY) on Mad Money. Many pundits think that all we get out of China are lies, and lies, and that the numbers are all inflated. However, Sutherlin looks at electricity numbers, and electricity usage fell dramatically for months before bottoming out in July and improving in August.

The iron-ore stocks are also forecasting a bottom, and the copper breakout couldn't be more definitive. I am not even counting the breakout in gold, because there are so many quantitative-easing programs going on that it could have nothing to do with China. But it sure isn't a contra-indicator.

These are the signs we have been waiting for, so I can't foment new ones that say it isn't happening. The derivative American stocks say it, too. General Electric (GE), Freeport McMoRan (FCX), Vale (VALE) -- they are all saying that it is happening now.

We keep waiting for something big out of China, something bigger than the $158 billion infrastructure spend we seen had so far.

I have become convinced that the Chinese won't do anything until Europe has gotten its house in order, because 20% of its exports go there. I also think China wanted to see what the U.S. was up to. We know now that Fed chief Ben Bernanke is about reflating. Europe seems that way, too -- and now Japan is joining the party.

Maybe we are looking for the wrong things out of China. Maybe all we need to do is look at how well everyone else is doing, and see if China can't or isn't already piggybacking off that.

We're seeing too many positive data points. One of these days, China will issue a stronger-than-expected official number, and then these prices will be justified.

That day isn't here yet.

But these numbers are too strong for me to believe that there's no fire where there's a ton of smoke.

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