Yuan Deval Again? Evergrande Back in Focus

The yuan devluation scenario has never gone away as long as the dollar remains richly valued, China relies on foreign reserves to back its currency, outflow pressure keeps reserves from rising, and China's monster credit bubble grows with repeated use of forced production, such as making steel, for short-term GDP boosts.

Bloomberg: Evergrande Bonds Pledged at 53% Discount in China Funding Market

China Evergrande Group bonds are suffering steep haircuts in a key onshore funding market, showing just how risky the bonds are perceived to be by mainland dealers.

Holders of Evergrande’s 2023 yuan bond are being forced to accept a 53% discount to pledge the note as collateral in the repo market, according to China Securities Depository and Clearing Corp. data, versus 28% in April. A markdown of around 57% of the bond’s face value was seen in the wake of the developer’s previous liquidity crisis in October, the data showed.

The larger haircuts come as the property giant struggles to convince investors it can generate enough cash to pay down debt. While Evergrande -- the world’s most indebted developer -- is rated the equivalent of investment-grade by China’s largest credit risk assessor, several of its onshore notes have slumped to record lows this week as concern over its financial health worsened.

U.S. stocks suffered a quick 10 percent haircut on the yuan devaluation in 2015. They would rebound, but then sink to a low in early 2016 led by energy and commodities. Back then, there was cooperation by central banks. Would there be cooperation this time around?

I seldom time these things because it's impossible to know early on. More signs will emerge if something is creaking under the hood. I will look for specific stock and forex trades if this develops. Casions with China exposure were crushed last time.

Capital Flight From China Has New Destination, Institutions Become Day Traders

China's capital flight took a new turn in July with the BigTech crackdown sending money to heaven. The assault on U.S. listed Chinese companies finally turned back on China and shaved trillions off teh A-share market valuation. Retail and institutional investors are daytrading now as they are unsure of what the immediate future holds.

iFeng: 风暴眼|机构彻底“韭化” A股直上直下震惊资本大佬 官媒:以改革应对挑战 (A-shares go straight up and down, shocking capital tycoons official media: reform challenges)

Core Aspects:

1. After experiencing an "avalanche" plunge in China's concept stocks last Friday, A-shares also plunged in the first few days of this week. On the two trading days of July 26 and 27, A-shares lost more than 4 trillion yuan. Northbound funds flowed out nearly 17 billion yuan in two days, and more than 3,000 stocks fell by their limit.

2. Behind the dramatic volatility of the stock market is that institutions and large funds have gradually become "retail accounts" and "leeks". Institutions have begun to follow suit, and large funds have frequently flown in and out.

3. Hu Xiaohui, chief investment officer of the Federal Reserve Securities, told Phoenix.com "Eye of the Storm": "The intuitive reason for this round of decline is due to the plummet of education-related listed companies, but the core logic is not only this. It should be seen that the release of consumption, The combination of factors such as domestic economic growth, central bank monetary policy, unfriendly international environment, and high market valuations has become the driving force for the merger."

4. On the evening of July 28, in response to the recent fluctuations in the capital market, Xinhua News Agency published an article stating that the fundamentals of China’s economic continued improvement have not changed, the foundation for the development of China’s capital market remains solid, and industry regulatory policies are conducive to China’s long-term development. . Responding to challenges through reforms is the meaning of the question.

The violent market volatility has also caused many private equity, public offerings and investors to ask questions: Do A-share companies need to be revalued? Has the logic of the capital market changed?

On the evening of July 28, an article by Xinhua News Agency answered the recent volatility in the Chinese stock market and the worries that existed in the market.

Xinhua News Agency believes that the fundamentals of China's continued improvement of the economy have not changed, the foundation for the development of China's capital market remains solid, and industry regulatory policies are conducive to China's long-term development.

The latter is the same bullshit all politicians and bureaucrats the world over say when things are going poorly. Financial markets respond to fundamentals in the very long-term, but in the short-term they are psychological. The CCP just nuked two of its most impressive industries that attracted foreign capital. Chinese investors are wondering what industry will be targeted next? Investors in the U.S. and elsewhere should pay close attention because this is what the public is baying for: anti-trust action against BigTech companies and corporations.

Taking a step back, perhaps this isn't a big news item for China in the long-term. The policy isn't a total shock for long-term China watchers. That opens the door to a bigger issue looming in the background: a Chinese and global economy that is in fact not on sound footing and perhaps vulnerable to a major shock. Worth remembering that it was the month of August in 2015 when China shocked global markets with the sudden depreciation of the yuan.


BTC No Change in Outlook

Good spot for taking short positions. If it were a stock I'd say low risk, but since BTC can jump sevreal thousand dollars in a day and trades over the weekend, and if it breaks resistance it would probably run hard, taking a short position via stocks is not a very low risk prospect. That said, I'm shopping for stocke-related puts.
Below are some related stocks, all sporting similar patterns.


Update: Info Scrubbed! The Vaccinated Are Spreading Covid Mutations

And scene. USA Today: CDC says vaccinated people may transmit virus, recommends masks indoors
CDC Director Dr. Rochelle Walensky said new data shows the delta variant, which accounts for more than 80% of the new infections in the U.S., behaves "uniquely differently'' from its predecessors and could make vaccinated people infectious.

"Information on the delta variant from several states and other countries indicates that in rare occasions some vaccinated people infected with the delta variant after vaccination may be contagious and spread the virus to others,'' Walensky said in announcing the new guidance. "This new science is worrisome and unfortunately warrants an update to our recommendation.''

Do you believe it will stay rare? I don't know because I have exactly zero trust in the CDC. How long until we hear about ADE? Antibody-dependent enhancement is a phenomenon in which binding of a virus to suboptimal antibodies enhances its entry into host cells, followed by its replication. Short story: some vaccines can make a virus worse. Nobody knows if that will happen in this case, but some warned it could happen with experimental mRNA vaccines.

International Journal of Infectious Diseases: Antibody-dependent enhancement of coronavirus

Antibody-dependent enhancement (ADE) exists in several kinds of virus. It has a negative influence on antibody therapy for viral infection. This effect was first identified in dengue virus and has since also been described for coronavirus. To date, the rapid spread of the newly emerged coronavirus, severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), causing coronavirus disease 2019 (COVID-19), has affected over 3.8 million people across the globe. The novel coronavirus poses a great challenge and has caused a wave of panic. In this review, antibody-dependent enhancements in dengue virus and two kinds of coronavirus are summarized. Possible solutions for the effects are reported. We also speculate that ADE may exist in SARS-CoV-2.
Good luck to humanity if this happens. No sign of it yet, but the virus staying in "vaccinated" people makes an unlucky mutation more likely. Vaccine in quotes because an actual vaccine wouldn't let the virus spread in the body. Insteady, the not-vaccine stops the spike protein, leaving the vaccinated unharmed by the virus in most cases, but their body doesn't clear out the virus as the unvaccinated do. In other words, it's a real possibility that the scientists and governments of the world have just made any chance of herd immunity impossible. Immunity to coronavirus was unlikely anyway. There's no cure for the cold. For now, the only reliable weapons are vitamin D, zinc, exercise, weight loss, etc. and the wonderdrug that almost every government hates: Ivermectin.

Meanwhile, they're going to torture children again.

Walensky emphasized the importance of getting vaccinated, saying so-called breakthrough infections of inoculated people are rare and typically don't lead to serious illness.

She also said the new guidance applies to schools as they gear up to begin the fall term, noting that students should return to in-person learning full-time.

"CDC recommends that everyone in K-12 schools wear a mask indoors, including teachers, staff, students and visitors, regardless of vaccination status,'' Walensky said.

This is straight up child abuse. The leadership of the CDC and whatever other government bodies are recommending this nonsense, going on 18 months of failed policies, belong in prison.
Update July 28:

UPS Breaks Wedge

UPS is a major holding in the Dow Transportation index. It needs one more large shoe to drop to complete its topping pattern.
Roku possible double-top if tech loses steam.


Copper Approaches The Tell

Has the global economy shifted into an inflationary regime or is this the last gasp of another short-lived bull market in commodities? Short-term I lean bearish, but long-term I lean bullish. The powerful move over the past week is either the start of a new rally or the "Return to Normal" on the bubble chart below.


Buzzards Around Blizzard

Authoritarian USG Takes Shape

The Capitol Police are expanding into Florida and California. They are the special police for Congress and are not subject to Freedom of Information Act requests.

HuffPo: The Capitol Police Are Not Subject To Freedom Of Information Laws. Jan. 6 Could Change That.

Unique among major law enforcement agencies, the roughly 2,000-officer department that secures Congress isn’t subject to a transparency law that allows the public to access official records. As a branch of Congress, which is excluded from FOIA, no such law applies to the Capitol Police. When presented with FOIA requests, it’s common for the agency’s counsel to respond simply that it doesn’t have to comply. In 2005, Congress passed a law that gave the Capitol Police more latitude to shield records the department deemed sensitive from public disclosure.

...The Capitol Police have drawn scrutiny over the years for arresting journalists and protesters, use-of-force incidents and discrimination allegations. But documents surrounding such events are often inaccessible unless they’re produced as the result of a court case. The agency shields basic records, like Office of Inspector General reports, from the public.

“A lot of people are rightfully asking really tough questions of the Capitol Police and the reality is that, unlike most police departments, we’re going to have a really tough time getting answers,” said Michael Morisy, chief executive of MuckRock, a news outlet devoted to public records access and reporting. “They have a track record of not being transparent about their operations, especially when there’s scandal or scrutiny.”

Federal law enforcement agencies like the FBI or Immigration and Customs Enforcement have public disclosure requirements under FOIA. Local police departments typically have similar responsibilities under separate state laws.

Washington Examiner: Capitol Police expansion to California and Florida prompt fears of government overreach
Acting Capitol Police Chief Yogananda Pittman announced Tuesday that the department would open field offices in San Francisco and Tampa. The offices, Pittman said, will “investigate threats to members of Congress,” and more regional offices will be announced in the future.
In the movie Escape From New York, the country created a federal police force to deal with out of control crime. Democrats in various cities are defunding police and letting crime skyrocket. George Soros and other left-wing activists supported district attorneys in the 2020 election who are letting murderers walk free.It's hard to pick a worst of the bunch, but lately the one he supporteed in St. Louis, Kim Gardener, is not showing up in court. Judges are letting murderers walk as a result.

KSDK 5: 'Kim Gardner is a poor excuse for a prosecutor': Family of murder victim outraged after charges dropped, suspect freed

St. Louis Circuit Attorney Kim Gardner’s office has “essentially abandoned its duty to prosecute those it charges with crimes.”

This according to St. Louis Circuit Judge Jason Sengheiser, who dismissed a murder case Friday after Gardner’s prosecutors failed to appear for multiple hearings on the case.

Brandon Campbell is accused in the shooting death of Randy Moore back on April 9, 2020.

St. Louis police told the I-Team murder suspect Campbell is now free, despite a statement from Gardner’s office saying it re-filed the charges and that he is in custody.

This wasn't a mistake. This has been going on for months in this case alone and the judge was fed up.

Why is the upper echelon of the ruling class unleashing murder and mayhem on the poorest and most vulnerable Americans, while unleashing an authoritarian police state on their political enemies? It's clearly an effort to push a federal police force that will put the ruling class in total control over that nation. Between this power and the lockdowns, all political and economic life will be controlled in Washington, DC.

America Loves Cardboard

Have to wait for a touch of resistance, around $600 if soon or more likely $620 to $630 in a month or so. At this point, the bull case for Domino's is never ending lockdowns and the growing mass of American welfare addicts splurging on cardboard.

Cost Inflation Shorts

PPG Industries plunged earlier this week on earnings because it reported higher costs. Another firm with earnings coming up is Packaging Corp of America (PKG).

Crude Oil

Resistance is here and up to around $74, then it's on to new highs. On the downside, below $60 and the bears will be in control. The $60 to $75 range is the battleground. The relevant levels for USO are the $51 level (52-weel high) and $40 as last support for bulls. USO's high was at the 61.8 percent retrace of its 2020 decline.



One I've posted before. This should go higher if the bulls are still in control. It is still below former support (blue line) so it's not long-term bullish with a move through the horizontal. Failure would be a good sign the market temperment has shifted.



Sometimes I post charts that look good, but I don't have an opinion on. This is one.

Imminent Bear or Topping Process

Three charts today. I remain bearishly oriented, but right now my largest trading position is a huge one in XLE call options. I expect a further bounce. That said...I don't know if it will be a brief relief rally before more selling or a larger rally that sets the market up for a bigger decline into the more seasonally bearish September.

BTC is approaching my support line. The break below $30k is important, but through support is when selling accelerates. BTC is less correlated with financial markets. I'm agnostic on the short-term, but still expect a break of support.

Next up is the imminent correction chart. Best expressed by SPDR Materials (XLB). We get a bounce up that fills the gap on various charts, followed by a swift decline. If this plays out, this rally will burn out today or tomorrow. This would also be better for the bulls because it might mean we get a summer correction, albeit a deep one, instead of a bull market top.
Finally, the larger topping process can be best shown with SPDR Energy (XLE). It could form the right shoulder of a head-and-shoulders topping pattern. This is highly speculative, but a "top" for the shoulder could come sometime after mid-August, with a break of the neckline coming sometime in late September out to mid-October, give or take a few weeks. This would likely coincide with the "end" of the bull market. End it quotes because who knows if we'd get another March 2020 style panic and stimulative rebound, or if it would be more like a 2000 repeat. For the latter, tech peaked in March 2000 and the rest of the market hung on until in September. Parts of tech such as ARKK and Tesla peaked back in February. Another intereseting corrolary, but not as important, is the strength in natural gas.