One Trader Warns "We Just Heard A Distinct Chirping From China's Coalmine Canary"

Tyler Durden's picture

With the 24/7 pump from mainstream media that everything is awesome (look at record high stocks) - despite President Trump - it's all too easy to ignore collapsing 'hard' data, geopolitical turmoil, and the looming reality that the world's central bankers are taking a distinctly hawkish turn. However, as former fund manager Richard Breslow notes, overnight we just got a big reminder that butterflies' wings are flapping around the world, and no one knows when the chaotic hurricane will follow...


Via Bloomberg,

There’s no escaping the fact that the financial world is completely interconnected. Everyday, we say some market was up or down because some other one made a move. In a more direct context, there’s been a lively debate on whether rates can go up in parts of the world and not others. And we’ve pretty much accepted that it will be a global phenomenon, if and when it happens. This morning, I was told that Asian equities were mostly up due to strong economic data from China. And it was good data, so that made sense. But look at the wild ride Chinese equities went on and be reminded that what looks like a hazy, lazy summer Monday is masking a lot of potential volatility out there while markets continue on believing, correctly, that the central bank “puts” are very much still in effect.

Japan was on holiday and there isn’t much news on the calendar. Not a Fed speaker in sight. European inflation data was benign and low. Certainly nothing that will light a fire under the ECB later this week. European and U.S. equities are trading quietly and calmly. Emerging markets are reminding us that there are no problems in the world.


You really have to be amazed at how effortlessly equity volatility in that second largest economy in the world was utterly ignored. It doesn’t fit the script.


After last week’s data and speeches, markets have concluded they have a clear path at least until autumn. The band has been coaxed into playing another set. For now, nothing can go wrong. And if you needed any proof that central bank policy is the ultimate driver of these markets, here you have it.
But can you imagine the hysterics if the U.S. indices had the kind of day their counterparts in China had? No one would be talking about anything else. What was the alleged cause of the sell-off? Tighter regulation and easing of the IPO pipeline. That was one doozy of a reaction. I guess Western investors sure are glad that our regulators are debating how to cut back on all those rules. It’ll keep things bid.


At the end of the day, however, we’d better keep an eye on what’s going on in important markets elsewhere. No matter how much we want to lazily enjoy the interregnum before Jackson Hole. We spend a huge amount of time about the search for the canary that warns about market direction. Well we just heard what may be distinct chirping but the mining stocks went up anyway.


The Shanghai Composite was saved by a diving catch from its 55-day moving average. How well it continues to define the downside should be a meaningful input to decisions about your trading strategy for the next period. Oh, and did I mention, the Australian dollar just made another new high today.

As a reminder, while last night's Chinese macro data surprised to the upside, it appears unsustainable... As Julian Evans-Pritchard, China economist at Capital Economics, noted, the strength seen in the data seems unlikely to last:

"The recent crackdown on financial risks has driven a slowdown in credit growth, which will weigh on the economy during the second half of this year.


"What’s more, the National Financial Work Conference that concluded over the weekend has signaled that further regulatory tightening remains on the horizon."

For the last three months, Chinese data has been disappointing, along with US, as the collapsing credit impulse leaks into reality...

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idea_hamster's picture

"We Just Heard A Distinct Chirping From China's Coalmine Canary"

This is the dumbest mis-use of that metaphor ever.  The whole reason they used canaries was that they *died* first -- if it's chirping, it's OK.

Ghost of PartysOver's picture

Come on man, seriously!  There is no place for logic in todays Murica.  Get with the program or you will spend some time in the Re-education Cmp.

idea_hamster's picture

I gave up on dodging the gulag a long time ago -- the good news is that I look pretty good in orange.

Nobody For President's picture

I look shitty in orange - guess I'll go down guns blazing on my front portch...

Bes's picture

slow news day. 

no bullshit trump stories to spin.

Arnold's picture

You can send me a letter...
Send it by mail..
Send it in care of..
FEMA, South Bay....

besnook's picture

he heard the btfd chirp so the it is the proper use of the metaphor. the canary looked dead but isn't.


" It's not dead. It is just resting. "

Creative_Destruct's picture

Exactly. Better phrasing :" We Just Heard a Distinct Gagging..."

Ghordius's picture

there is a slight difference, though

in China, it's the central goverment that is clamping down on credit. (up to the point where local gov is accused to falsify some statistics)

in the US... it's bankers, economists and pundits that swoon whenever credit is less sought after

the Church Of Growth's Prophet, Dr. Professor Krugman of Cargo Cult Fame hates when credit is not flowing in vast quantities

PUNCHY's picture

How's this for an elegant solution to the canary dispute: Fcuk the canary, put Dr. Professor Krugman down the coal mine instead.

I'll take your answer off the air.

DeathMerchant's picture

Put Bernanke down there with him so they can jerk each other off while they await the methane.

Arnold's picture

Is there still room for Larry Summers?


Give them a box of matches so they can check for gas once in a while. 

BandGap's picture

Uh, are you sure? I just read last week, on these pages, that China's record expansion in credit might not be enough to prevent a collapse.

So which is it?

I tend to think they (China) need their shadow banks to keep the ponzi going and prevent social upheaval.

LawsofPhysics's picture

Neither is sustainable...

   ...FYI China is printing at a rate that make The Fed look like an amateur.


"Full Faith and Credit"

BandGap's picture

I thought I read it was almost 4 times the rate. I guess when you go off the cliff yu might as well accelerate at the end.

WTF is Gordius talking about?

Lost in translation's picture

I used to have doom fatigue. Now, instead of doom fatigue, I have "the last time this happened" fatigue and sundry "oh noes!" fatigue. ENOUGH.

Crash already. Or shut yer orifice.

I'm going to go outside and smoke a cigar, brb...

PUNCHY's picture

Sorry, but you left out the since Lehman bit.

Lost in translation's picture

Padrón No. 4, 1964 Anniversary Series...

The Duke of New York A No.1's picture

Don't worry ... the FED's proxy's will keep selling as many VIX contracts as it takes to keep the sheep in the pens.




lester1's picture

Nothing the Fed's PPT can't handle to keep our markets propped up !


syzygysus's picture

The canary has been propped up and stuffed full of fiat.  it ain't chirping, but it also ain't flopping down off it's perch in the cage.

idea_hamster's picture

[img: Monty Python dead parrot sketch]

Exota's picture

lol ,i'm getting advertisment about birds all over the ZH page

logicalman's picture

Mr. Praline:
Never mind that, my lad. I wish to complain about this parrot what I purchased not half an hour ago from this very boutique.

Oh yes, the, uh, the Norwegian Blue...What's,uh...What's wrong with it?

Mr. Praline:
I'll tell you what's wrong with it, my lad. 'E's dead, that's what's wrong with it!

Owner: No, no, 'e's uh,...he's resting…..

Bam_Man's picture

When they have pushed the VIX to ZERO and are able to keep it pinned there, the Japan-ification of our "markets" will be complete...

sheikurbootie's picture

Dumbass author

A canary in the coal mine chirping is a GOOD sign, it's when the bird dies that it's a sign of trouble.


assistedliving's picture

TPTB get bigger destroying all in their path w/ 'free' money, crony capitalism, Mozilla no jail gorilla

and small biz regulatory overkill.  

move on (and under the steamroller and you will enjoy it)


Rick Cerone's picture

Criminal activity is sustainable.

Rallydude's picture

We the People... are the canaries in the Coal Mine. 

GoldenDonuts's picture


One Trader Warns "We Just Heard A Distinct Chirping From China's Coalmine Canary"


Its when you DON"T hear the canary that you have a problem.   Which is actually the problem.


Hongcha's picture

Another China in Crisis op-ed.

To paraphrase Falstaff - what is a number?  A digit.  And what is a digit?  zeroes and ones.  And what are they?  Nothing at all.  thus endeth my soliloquy.

China can and will fabricate whatever numbers serves its needs.  No truth needed in this recipe!  None !!

Apeon's picture

Has anyone considered that the entire World is now actively managing their economies may have an effect on how things are working!


Internal combustion engine------V8----cylinders 2,6,5,7, working full time, 1,3 part time, 4, 8 not

                                                               All working full time----do not understand why we are moving so fast!