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China & The Mother of all Double Tops?

Wednesday, May 30, 2007 | 06:17 AM

in Investing | Markets | Politics | Psychology/Sentiment | Trading

Shanghai was down 6.5% this morning.

The alleged cause was news that Chinese officials were raising the tax on stock transactions from 0.1% to 0.3%. They have been trying to reduce the speculative bubble there, but to no avail. (Stocks in China are limited to 10% daily movement).

The Shanghai Composite hit 4334.92, its highest level ever. YTD, its up 62%, and since mid-2005, the index has gained 328%.

Marketwatch reports that "Outside of China, global markets declined on Wednesday, but not precipitously - the Nikkei 225 closed with a 0.5% loss in Tokyo, and the FTSE 100 declined 1.1% in London."

What will be interesting today is whether or not it sticks. Here in the US, markets have up until very recently, been clawing back from any negative opening. Its only over the past two weeks that we have seen tired trading, with an inability to sustain a strong open.

The failure of the SPX at the prior highs -- 1527 on closing basis -- and an inability to make a new high has some technicians wondering if we are looking at the mother of all double tops. (I have no opinion on this).

Whether the straight up market is merely tired, or overdue for some sort of pullback, or if this is the start of something else is unknown for now.

Futures are in the red, with the Dow down 70, the Nasdaq off 10, and the S&P500 off 7.5

Today's trading will be quite interesting to say the least.