Is China's Weakening Economy Behind Today's Market Break?

Larry Kudlow thinks so:

The real source of today’s stock market plunge is a collapse of China’s purchasing managers index, which fell to 40.9 in November from 45.2 in October, its fourth straight monthly drop. Inside the index, export orders fell significantly. All of this suggests big cuts in China production, employment, and investment, including infrastructure investment.

Over dinner last week, economic Nobelist Robert Mundell, who advises the Bank of China and travels there every other month, told me the Chinese economy is in bad shape. As a bulwark for the global economy, the China card is fast turning unreliable. Not only are stocks falling everywhere else in response to this disappointing China news, but commodity prices like palladium, silver, gasoline, oil, and gold are all plummeting today. I’ve only seen one news story that reported on this China economic decline, but I’m convinced it’s the main factor behind the U.S. stock drop.

I wasn't watching the market close enough today to get a sense for how accurate Kudlow's comments are,e.g.what news the market reacted to, but if the Chinese economy is slowing, and it appears that is the case, then it will just add to the current global crisis.

But remember, we are in December, so there are always a lot of cross trends in this month, as I pointed out last week in commenting on a column by Andrew Kessler. Further, news that Paul Tudor Jones had to freeze his flagship fund because of redemptions, while being down only 5% in the year, had to make a lot of traders nervous.

As I said last week, the opportunities are being set now for huge gains in January.