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This Could Turn Out to be Very Scary ...

The U.S. vs. China currency clash is coming to an end. The investor consensus is that the yuan could appreciate by 5% by the end of this year.

What's at stake?

Exports for the U.S. at a time when we need more jobs. But the opposite would hold true for China .. a decrease in their exports which would translate to a slow down in their GDP.

Most economist would say that it won't hurt them, or that they need to slow down or face inflation. (China's GDP rose to 11.9% from the same period a year ago ... this was the fastest expansion rate in nearly 3 years.)

It won't hurt China?

That is not what their stock market chart is saying. Today, we posted a long term view of the Shanghai Composite Index and it showed a scary picture last night with a 4.79% drop.

It wasn't last night's drop that was scary ... it was the breakdown in the index's triangular pattern.

The downside projection for this pattern is about 30%. So their stock market is saying that something is terribly wrong. Part of it may be the yuan vs. the Dollar, but something else is more likely to be the culprit. We don't know what it is yet, but it should become apparent fairly soon.

Shanghai Composite Index

 

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