With all the talk of a market rally driving the S&P to post crisis highs, top trader Steve Cortes is confounded that pros are all but ignoring a very serious situation.

“China is trading at its lowest levels since the 2007 crisis and that’s a big problem for the markets,” says Steve Cortes, founder Veracruz, a research and consulting firm.

Here’s why.

Cortes sees the weakness as a sign that China's economy is slowing far more rapidly than most investors seem to understand. And unlike the US, Beijing can’t embark on widespread easy money policies.

That’s because, unlike the US, for the average Chinese citizen, a large portion of income goes toward buying food. If Beijing stimulates the economy aggressively, they risk inflation - particularly in food prices. Read More:"Food Price Shocks— Is Asia Bracing for an ‘Acute’ Jolt?"

In the past, a rapid rise in food prices has triggered civil unrest in China's poorer regions.

Cortes argues that Beijing can't afford that kind of risk.

And he adds that an exogenous factor makes China’s situation all the more precarious. “The drought here in the UScould not have happened at a worse time,” he insists. The drought has diminished the harvest which increases prices simply due to the laws of supply and demand.

Therefore, Cortes argues that Beijing can’t embark on aggressive easing – and risk driving food prices to a point that they trigger civil unrest. Instead, Cortes believes, Beijing will opt to allow the economy to cool down.

“To my way of thinking, the market is looking might toppy,” Cortes tells us after the show. “People like to say there’s a Bernanke put in the market, but there’s nothing Bernanke can do about this.”

Cortes goes on to say, “I don’t like to pick levels, but I have no problem saying right now I can see the S&P sliding to 1300. From there, I’d have to see.”

Of course, not everyone shares Cortes' outlook. Jim Paulsen of Wells Capital Management certainly doesn't. He expects the market to trade 1500 by the end of the year.

He argues that recent economic data confirms that the US is getting incrementally stronger.  "We’re getting a lot of good reports – not just – but unemployment claims are falling, are improving and we just got better confidence data."

Also he believes that the worst of the European financial crisis has been ring-fenced. And he believes that Beijing has more ammo than bears such as Steve Cortes give them credit for having.

All told, Paulsen says, "do you really want to be short this market?"

What do you think?

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 20, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso is long S; Steve Grasso is long PFE; Steve Grasso is long XLU; Steve Grasso is long MO; Steve Grasso is long MHY ; Steve Grasso is long LNG; Steve Grasso is long FRO; Steve Grasso is long D; Steve Grasso is long BA; Steve Grasso is long ASTM; Steve Cortes is long FB; Steve Cortes is long LQD; Steve Cortes is long PPH; Steve Cortes is long XLU; Steve Cortes is short MEX PESO; Steve Cortes is short XME; Steve Cortes is short IWM; Steve Cortes is short COH; Jon Najarian is long AAPL CALL SPREADS; Jon Najarian is long JPM CALL SPREADS; Jon Najarian is long GDX CALL SPREADS; Jon Najarian is long GLD CALL SPREADS; Jon Najarian is long SBUX CALL SPREADS; Jon Najarian is long FB CALL SPREADS; Jon Najarian is long GLUU; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long S


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