The Shanghai bounce

It has proven correct, that the 400+ point bounce yesterday was the result of two events. First of all was in response to Mr. Greenspan's influence on the markets. For he guesstimated that the economy is headed to another recession later in '07 and early in '08. The reason he said this was because our economy has been so robust so many years following the 9/11 event.
According to other prominent economists from some powerful firms, he might be incorrect. But because he has so much influence on the markets for so long, that when he coughs, people listens or sells. I guess this was the case yesterday.
The other reason for the Shanghai Bounce was because of the China market. It is so volatile, having risen by 130 percent in '06, the world's best performance. To try and slow growth, China has threatened to impose a 20% tax on the dividends. This basically leading to a 10% sell off.
Then once the US markets caught wind of these actions, our traders on the floors of the markets followed suit. Leading to the massive correction.

There is not that much the US economy can do about the correction on the China markets. For it has been growing so large and so fast, that something like yesterday was going to happen. The correction is only going to be short lived.

The other factor that influenced the Shanghai Bounce, was some influence of Mr. Greenspan. It might be the result of a hiccup and/or sneeze in which the traders on the different exchanges mistaken for massive sell off.
In response, the Bush Administration and Mr. Bernanke (Greenspan's replacement) assured the traders that the economy is responding appropriately. For his influence has caused a ripple effect around the world.
There is certainly an annoyance factor there," said Brian Bethune, economist at Global Insight. "Why doesn't Greenspan go to Hawaii and play golf?"

(When I composed this entry, I have used some facts and other statements in an article Greenspan's clout "When He Speaks, investors Still Listen" and the "China's frenzy Tax Rumor Helped Dim China Stock Exuberance".