But the Chinese strategy is very different from the Russians. With the US and Soviet Union, they match bomb for bomb. The crafty Chinese are more strategic. According to Sun Tzu in the “Art of War” the idea is to subdue the enemy without fighting. In 2012 China surpassed the US to become the world’s biggest trading nation. More important is they are using their newfound power to invest in Canadian and Mexican energy assets. The US imports 9000 thousand barrels of oil per day. Out of that 9000, 2666 comes from Canada and 1319 comes from Mexico which comes to 3985 and is 44% of our total. On April 3rd Mexican President Enrique Pena Nieto stated he considers China a strategic partner. “Mexico can be a gateway for China to enter North America, the world’s richest market.”
Can you see where this might present a problem? Not only is China our banker, but now they are going to supply us our oil too. There’s going to come a day in the not too distant future where they surpass us in economic clout by a much larger margin. You can be sure about that.
But here’s the dilemma. The Chinese are going about their business in a very intelligent way, if you are on their side. Do you really think the Chinese want to see the Kid rock the boat now? In my heart of hearts I think not. The Chinese have history on their side, the North Koreans do not. Can you tell me one example of a young dictator upsetting the apple cart and getting away with it? Even Fidel Castro was smart enough to coexist 90 miles from Miami.
So what does this really have to do with the market right now? Probably not a lot unless the Kid decided to do the unthinkable. If he does it will be a Black Swan because even the smartest guys in the room don’t think he’s that dumb. I tend to think the most important event of the 21st century is the transition for China to become the world’s #1 superpower. We are seeing it unfold right in front of our eyes. It makes news here this week simply because of threats coming out of North Korea.
What I’ll be watching this week are 2 charts. First of all we have AAPL which found a low 161 hours off its prior at the beginning of March. What makes this noteworthy is the low is also 61 hours off the late March high. So we have a condition where the true market leader had a cluster of 61/161 at the same point which is counterbalance to the rest of the market attempting to find that elusive high. We have a similar situation (without the timing symmetry) in Australia where their true market leader sector Materials had a furious selloff but now is in serious bounce mode.
The other condition I’m watching is something one of my students brought to my attention. Long time student Dennis brought to my attention that GS (Goldman Sachs) bottomed at 219 hours down after peaking on February 19 (2/19). This is significant because these kinds of symmetries tend to go longer than most market participants anticipate and it could be a case of leverage for the BKX. As long as the BKX doesn’t want to turn down, nothing really bad is going to happen to this market. Finally, even the bears couldn’t sustain prosperity. They had everything going for them on Friday morning but even the SPX left a lower tail. They just don’t make bears the way they used to.