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What the Drop in Shanghai Stocks Could Mean for US

When it's hot, it's hot, but now it's not. So what does the 16 percent drop in Shanghai stocks this year mean for the U.S. stock market?

Citigroup chief U.S. equities strategist Tobias Levkovich is keeping an eye on the Chinese stock market because he says it can provide clues about possible U.S. stock market direction.

"The Chinese market tends to lead the U.S. market by about three months, and China peaked in November. It's down about 7 percent since then," Levkovich said in a recent interview. "If you think about that, February could see a hiccup" in U.S. stocks.

The Shanghai composite started to decline from above the 3100 level in November. It finished Thursday at 2,759, down 2.7 percent for the week. In that same time frame, the S&P 500 has moved higher, gaining nearly 7 percent in December alone. The S&P is up 12.8 percent for the year.

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