The chart speaks for itself, I think. From MaoXian’s blog, this chart shows the dollar turnover in Shanghai A-shares.

A speculative blowoff like this typical ends with exhaustion and panic. Unfortunately, how high? is an unanswerable question. We will only know after the fact. But the parabolic nature of the curve - ever steepening - says that it can’t go much longer. Trees don’t grow to the sky.

Event risk is part of any investment. It is the risk that something unforseen might happen. Does the Shanghai market represent event risk for the US markets? February 27 says yes, it might well. A momentary break in Shanghai caused a momentary break in the US. Perhaps a second break will be dismissed after the first turned out to have no lasting effect. There’s no way to know. But I think ignoring this risk is probably not the smartest thing to do. Clearly the Chinese authorities have got themselves between a rock and a hard place. If they crack down on the speculation there will be a panic as the amateur speculators rush for the door. If they don’t the crash will be worse later. This is an accident looking for a time to happen.