Watch The Shanghai; Not The Dow

Was it a deal made with the devil? China provides us with cheap goods in exchange for trillions in U.S. Treasuries.

They got access to our insatiable demand and we got access to their un-ending supply of electronics, clothes, and machinery.

Now, for better or for worse, the Chinese and American economies are linked at the hip.

Sunday night, it was for the worse as the Shanghai sold off, it left a mess of U.S. markets on Monday morning. What’s worse – Shanghai shares are already down 10% from the highs – and some say headed for their own bear market.

As “de-coupling” dies a slow death, is there any way to untangle a U.S. recovery from an unraveling Chinese market?

Probably not, according to Amanda Drury of CNBC Asia. Don’t forget economist David Rosenberg has said, China’s Shanghai index has proven to be a leading indicator for the rest of the globe...it led the way down last Fall and led the upturn last November, she says.

What do you think? We want to know!










So, what’s the trade?

It’s probably a currency trade, says Joe Terranova. There’s also a strong correlation between the Shanghai index and Australia’s dollar . So when the Shanghai market shows jitters Australia’s currency tends to lose value.


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Trader disclosure: On Aug. 18th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (HD) Sept. Call, Is Short (HD) Aug. Call; Najarian Owns (HPQ) Sept. Calls, Is Short (HPQ) Aug. Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PALM) Call Spread; Najarian Owns (TRLG) Calls; Najarian Owns (YHOO) Call Spread; Najarian Owns (BUCY) And Is Short (BUCY) Calls; Najarian Owns (INTC) And Is Short (INTC) Calls; Terranova Owns (AMZN), (STT), (MSFT), (KBHH); Terranova Owns (GOOG) Puts; Terranova Is Short (GOOG), (AVB); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Grasso Owns (ASTM), (BAC), (C), (COST), (PRST), (V), (WMT), (FAZ), (XLF)

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