David Rohde at Reuters quotes James Jeffrey, a retired career U.S. diplomat:
Jeffrey said the days and months ahead will be vital. If Putin faces few long-term consequences for seizing Crimea, it will set a precedent for China and other regional powers who may be considering establishing 19th century-style spheres of influence of their own.
“The Chinese,” Jeffrey said, “are in the same position.”
Read more at As China looks on, Putin poses risky dilemma for the West | Reuters.
I have kept Michael Pettis January summary of the four challenges facing China:
China’s Shanghai Composite Index is again testing support around 2000. Follow-through below 1990 would signal a primary decline to 1850*. Reversal of 21-day Twiggs Money Flow below zero would warn of medium-term selling pressure. Respect of support is less likely, but would suggest another attempt at 2150/2250.
* Target calculation: 2000 – ( 2150 – 2000 ) = 1850
China’s Shanghai Composite Index recovered above 2100, suggesting another test of 2250. 13-Week Twiggs Money Flow oscillating around zero reflects indecision typical of a broad consolidation. Breakout above 2250 would complete a reversal, but breach of 1950 remains as likely and would warn of a decline to the 2008 low of 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
Hong Kong’s Hang Seng Index displays a large bullish ascending triangle on the monthly chart. Breakout above 24000 is more likely and would signal a primary advance, but reversal below the rising trendline would warn of a decline to 20000.
Declining 13-week Twiggs Money Flow (not shown) warns of long-term selling pressure on China’s Shanghai Composite Index, but the daily chart shows medium-term buying pressure. The index is currently testing 2080 on Monday, after the lunar new year last week, but the primary trend remains down. Respect of resistance at 2120 would reinforce this. Breach of support at 1950 is unlikely at present, but would test the 2008 low of 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
China’s Shanghai Composite Index found short-term support at 2030 on Tuesday, but another test of the primary level at 1950 appears inevitable. Declining 13-week Twiggs Money Flow warns of selling pressure. Breach of support at 1950 would offer a target of the 2008 low at 1700*.
* Target calculation: 1950 – ( 2200 – 1950 ) = 1700
The Shanghai Composite Index found support at 2000 and is retracing to test resistance at 2100. Respect would indicate a strong primary-down trend, confirmed if support at 1950 is broken. Some may find the move surprising after weak manufacturing PMI data on Thursday, but the real estate sector surged on the back of falling money-market rates following a liquidity injection by the PBOC. A 13-week Twiggs Money Flow peak below zero would also warn of long-term selling pressure.
* Target calculation: 2100 – ( 2250 – 2100 ) = 1950
BY Elbridge Colby, Ely Ratner
History has demonstrated the perils of focusing too much on stability at the expense of deterrence. The Cuban missile crisis, the modern world’s closest brush with the apocalypse, was precipitated by Soviet Premier Nikita Khrushchev’s perception that the United States, especially President John F. Kennedy, was overly concerned about stability and cooling tensions between the superpowers. Khrushchev’s sense that America could be pushed was formed by Kennedy’s cautious reactions to assertive Soviet moves toward Berlin, as well as Khrushchev’s measure of Kennedy at the 1961 Vienna superpower summit as “weak” and accommodating……..
OF COURSE, CHINA IS NOT THE SOVIET UNION. And 2014 is not 1962. The point is simply that a country with the power of the USSR or China, unsatisfied with features of the existing order, motivated to do something to change it, and skeptical of the resolve of the United States, could well pursue a policy of coercion and brinkmanship, even under the shadow of nuclear weapons. As historian Francis Gavin has argued, the whole history of the Cold War shows that countries like China — and, at times, the United States — can bluff, coerce, and threaten their way to geopolitical gain.
The worst way to deal with such a power is to leave it with the impression that these approaches work. Just as the United States would have been far better off if Kennedy, at the Vienna summit, had squelched Khrushchev’s doubts about his resolve to defend Berlin, it will be far better if the leadership in Beijing has the clear sense that the United States will meet each challenge to its and its allies’ interests resolutely.
Read more at Roiling the Waters.
An appeaser is one who feeds a crocodile, hoping it will eat him last.
~ Winston Churchill
A sharp fall below zero on 13-week Twiggs Money Flow warns of selling pressure on China’s Shanghai Composite Index. Breach of support at 1950 is likely and would offer a target of 1800*.
* Target calculation: 1950 – ( 2100 – 1950 ) = 1800
Michael Pettis summarizes the four challenges facing China:
I have followed Patrick Chovanec on Twitter for several years and really enjoy his insights. His latest Quarterly Report for Silvercrest Asset Management is no exception.
For the past several decades, the U.S. has served as the world’s consumer of last resort. That allowed developing countries – namely Japan, and later China – to turbo-charge growth by producing more than they consumed, confident in the knowledge that Americans would provide the demand by consuming more than they produced. (A parallel pattern emerged within the EU, with Germany playing net producer and the rest of Europe net consumer). The surplus countries kept the game going by taking their export proceeds and lending them back to their customers so the deficit countries could keep buying. This is the global growth model we all became comfortable with……
Listen to most market commentators: while they may say that the financial crisis showed us the error of our ways, their every word belies a tacit wish to return to the world we knew before 2008. “When,” they ask, “will the U.S. consumer start spending again? When will Chinese output get back on track?” Europe, they dare to hope, will turn out okay as long as more countries learn to imitate Germany. Maybe a cheaper Yen will give a renewed boost to Japan’s exports.
These hopes are misplaced. We’re not going back to the past. The old growth model is broken. Here’s what will replace it…..
Read Patrick’s outlook at SILVERCREST ASSET MANAGEMENT GROUP LLC 1Q 2014: Desperately Seeking Demand
Hat tip to Leith van Onselen at Macrobusiness.com.au
China’s Shanghai Composite is headed for 1950 after breaking support at 2080 to confirm a primary down-trend. Twiggs Money Flow below zero indicates selling pressure.
* Target calculation: 2100 – ( 2250 – 2100 ) = 1950
