Market Plunge Alert-----Margin Call Originating In China Roiling All Markets

Cycle screening measures were weaker on Wednesday in line with the loss in the averages. The aggregate measure turned down from deep in negative territory. Unless there’s an instant rebound on Thursday, this could be a crash signal. It doesn’t guarantee a crash, but it is a red flag. 8 of the 9 component measures are on the sell side on balance. 6 month cycle measures never came close to getting back to the buy side in the little rally over the past four days. Nor did either of the other current status measures. That kept us suspicious of the rally.

I want to repeat what I wrote last night. Margin calls and restrictions on selling in China will force Chinese wealth funds and other major players in that market to sell wherever they can around the world. The Greek tragedy playing out in Europe does not help. It may help Treasuries in the short run, but stocks remain extremely vulnerable.

China and the world will learn that it cannot insulate itself from its insane bubble promoting policies by forbidding selling. It’s a big world, and the big China players have access to it. China’s markets are imploding and could take the rest of the world down with them. We got a taste of what happens when Chinese wealth funds face a cash squeeze and can’t sell at home in June of 2013. That was a tiny taste. This time follows an epic drunken bacchanalian feast of margin and mindless speculation. With Shankhigh virtually shut down, Tokyo, New York, and London will be the vomitoriums.

Download this report to get the details daily, and to follow our market positioning and short side chart picks.

Market Update Pro subscribers (Professional Edition), click here to download complete report in pdf format.

Not yet a subscriber? Try the Market Update Pro risk free for 90 days (regular order form says 30 days, but I am so confident that you will want to continue the service, I'll make the guarantee for the full 90 day subscription term if you order now). If, within that time, you don't find the information useful, I will give you a full refund. It's that simple. Start your risk free subscription now and get instant access.

Are you an active trader?

If your answer is yes, click here. 

Because you already know that timing is everything!

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

Get Access