China

Long before "The Big Short's" Michael Burry was a household name for his insight into the upcoming subprime crisis of 2006-2007, there were many others among them John Paulson, Kyle Bass, and Corriente Advisors' Mark Hart. Just like Bass, Mark is another Texas-based hedge fund manager who correctly predicted, and profited from, the subprime crisis. He is also an expert on China, and in fact, just last month in the aftermath of the recent Chinese devaluation which roiled markets, he said that "China should weaken its currency by more than 50 percent this year."

The week explained...

http://www.youtube.com/watch?v=FsqJFIJ5lLs

Stocks extend gains this week - now the best 2-weeks since Bullard's Oct 2014 lows... BULLARD 2 - 0 REALITY

But ended on a weak note...

Futures give us a glimpse of the sudden buying panic into Europe's Open/China's close, selling at US Open on the "good" news... Weak close...

Even though Trannies and Small Caps gained on the day (more squeezes)...

Submitted by David Stockman via Contra Corner blog,

The Red Chip casino took another one of its patented 6.5% belly flops this week. In fact, more than 1,300 stocks in Shanghai and Shenzhen fell by 10% - the maximum drop permitted by regulators in one day - implying that the real decline was far deeper.

Whether this week's market surge was catalyzed by two consecutive "technical problems" in the bond market, first the unexpected failure of the Fed's MBS POMO on Wednesday and then the 7 Year Treasury auction's last minute cancellations yesterday, and quite clearly it was...

... is irrelevant as the short squeeze has not only returned with a vengeance...

... but the critical 1,950 resistance and 50 DMA in the S&P500 was taken out...

Last April, China had an idea about how to boost the country’s dying credit impulse.

As we’ve been at pains to explain for more than a year, China is attempting to do the impossible. They need to deleverage and re-leverage all at the same time. Efforts to rein in the mammoth shadow banking system after years of expansion put pressure on an economy that was already decelerating and by the end of 2014, Beijing was struggling to figure out how to keep credit flowing without embedding more risk into the system.