Overnight, the Shanghai Composite dropped over 5%, but that is not the real story.

Since June 19, when the index hit an intra-day high of 4,280, it had dropped to 3,616. That is a fall of over 15%.

Reuters presents the problem as one of too many Chinese IPOs coming to market and soaking up liquidity, but the greater force may be the realization that many Chinese products are dangerous and defective. Western countries, especially the US, could be restrictions on a number of Chinese imports.

Vegas odds are that Shanghai goes lower.

Douglas A. McIntyre