Chinese 'Dead Cat Bounce' Fades, "Hostile Sellers" Appear As Goldman Warns "Not Yet Fully Purged"

Amid the highest level Typhoon warnings, China's stock market continues to storm as only 49% of Chinese stocks are halted (down from 54%) as local analysts fear yesterday's bounce (just like last week's) was nothing but a dead cat bounce: "bounces like today prolong the timeframe to get that final bottom in place." For the 14th day in a row margin balances declined with the pace accelerating (down 10.9% yesterday alone) for a total over 36% decline so far. Seemingly on pain of death, someone is selling Chinese stocks as CSI-300 futures opened a mere 0.2% higher then sold off - no follow through for now. Goldman warned to expect another 30% decline margin balance and concludes, China "hasn't yet fully purged."

In case you're wondering why we bounced yesterday (aside from the death threats to shorts)... It was a very technical bounce off the 200DMA...

Stroms are gathering...

• *CHINA ISSUES HIGHEST-LEVEL ALERT ON TYPHOON CHAN-HOM

As more companies limp out from nehind the curtain of invincibility...

• *NUMBER OF CHINESE COS HALTED FROM TRADING FALLS TO 1,422
• *A TOTAL OF 49% OF CHINESE STOCKS ARE HALTED FROM TRADING (down from 54%)

Goldman noted the suspensions of shares are "really the key issue..."

With a number of stocks suspended - we've had 32 percent of the market cap being suspended - we haven't really had a clearing of price that's fully taken place and the deleveraging which has been going on hasn't yet fully purged

That's really what we're looking for for a sign of a market bottom."

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