A back door Chinese devaluation of the yuan happened while no one was paying attention. This is well summarized by Zero Hedge below:

“Less than a month ago, and just days after the Yuan was finally inducted into the IMF's hall of reserve currency fame, the Chinese Foreign Exchange Trade System, a part of the PBOC, made it very clear that what was about to happen would not be pretty, when it announced -in a statement which clearly everyone ignored- that going forward it would index the relative strength of the CNY not to the USD but a basket of currencies (against which the USD to which it is pegged has been soaring).”

The result is the currency fell to lows not seen since 2011.

And, over the weekend Kyle Bass stated the following:

"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."

At the same time, this was happening as the Chinese escalated stock market intervention. This is contained in this story via The Telegraph.

Our clueless Fed and Treasury were blindsided by what’s happening. “Incompetence” is the only explanation.

Stocks globally seem to be going through what appears as a slow-motion crash.

U.S. economic data wasn’t good except for one misleading report as the ADP Employment Report rose sharply to 257K new jobs vs 190K expected & prior 211K. Why is this misleading? We have holiday hiring and part-time work dominating. And again, 23K new jobs were in goods processing vs 234K in services…think Retail, Healthcare, and part-time work. These types of job are of the low-wage variety. But, bulls were quick to assert that Friday’s Employment Report would indicate “full employment” which is statistically true if you ignore the ugly details.

Elsewhere, Factory Orders declined to -0.2% vs prior 1.3%; PMI Services Index fell to 54.3 vs prior 56.1; and, ISM Non-Mfg Index also fell slightly to 55.3 vs prior 55.9. Taken together, employment statistics from these reports remain negative.

Late in the trading day, Fed Minutes revealed FOMC worried about low inflation data. The only conclusion from that is they’ll keep policies accommodative until that changes.

Staying on message, the American mood remains focused on issues not being discussed by the Fed, Treasury or Administration. The Gallup Poll reflects this as demonstrated below:

You don’t see Gun Control or Climate Change as important issues currently.

Stock markets have the likely appearance of a slow-motion crash developing which is easy to spot in charts below. One indication of this is the falling price of heavyweight Apple (AAPL) where shares are falling near lows of August’s flash-crash. Remember, given its high weight in most major stock indexes, it’s been easy to suggest, “as goes Apple so goes U.S. markets”. 

Market sectors moving higher included: Volatility (VIX), U.S. Treasury Bonds (TLT), Gold (GLD), Gold Stocks (GDX) and not many others.

Market sectors moving lower included: Everything else.

Below is the heat map from Finviz with anything in green being inverse and volatility related:

The top ETF daily market movers by percentage change in volume whether rising or falling is available daily.

Volume was heavy and breadth per the WSJ was negative.

The week thus far is reflecting what I’ve been arguing since summer—the market is putting in a top. Where we go from here is unknown by yours truly.

More employment news follows Thursday with the big one with Friday’s Employment Report. I’m sticking to my belief; a strongly positive number then will be greatly misleading. That’s because the quality of work will remain weak, no matter what bull’s say.

Let’s see what happens.