By now I trust everyone saw the beating the Shanghai Stock Exchange Composite Index endured on Monday. However, for those lucky enough to have enjoyed a three-day weekend, just know the Shanghai Composite declined nearly 8.5% on the day. That's the worst hit the Shanghai has endured since February 2007. I don't care how far you look back, or how often the media remind us the index is still up on the year. A decline of that magnitude is bound to rattle and disrupt all markets.
Adding to the woes of China bulls is the continued decline in all things commodity related. Of the 20 commodity-related ETFs on my watch list, only natural gas was higher. And even then the gain measured around 0.15%. Hardly worthy of making the evening news.
Agricultural traders were no doubt mesmerized by the declines in corn and soybean futures. The rest of us, however, continue to be far more interested and concerned with the never-ending selling in light crude oil and, to a lesser degree, copper. For the record, the front-month September light crude oil contract closed around $47 on Monday. A new low for that front-month contract.
As far as copper is concerned, equity traders are probably more concerned with how Freeport-McMoran (FCX) is trading. I shared some views on FCX on July 16 in Trader Notebook, when the stock was still trading around $16.50. With the stock closer to $11 now, I'd suggest a bounce is probably in order. But beyond that, the chart still looks horrible and in need of months and months of technical repair.
Moving on to the E-Mini S&P 500 futures (Es), I want to enter Tuesday's auction with an understanding that Monday's session closed with a somewhat weak low. Put another way, I wouldn't expect Monday's low to be a particularly enduring one. At this point, things would need change in a meaningful way to return the edge to buyers. So with that in mind, barring a shift in value back above 2087, I believe the path of least resistance will remain lower, toward 2045 to 2047.
From a one- or two-day perspective, I'm expecting any upside bounce to fade and reverse toward 2076 to 2077. I'd expect a shift in value beneath 2057.75 to be sufficient to trigger continuation toward the mid-2040s.
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