A funny thing happened to the markets about mid-November of last year. Stocks in the then-red-hot Chinese market began to show signs of weakness. At the same time, stocks in the U.S. market began taking off to what recently has been a series of new 52-week highs. The divergence between the Chinese market and the U.S. market can be seen in the overlay chart of the S&P 500 SPDRs (SPY) and the iShares FTSE China 25 Index Fund (FXI).

It seems to me that China is telling us something. You see, that nation’s central bank has clamped down on inflation several times since last October by raising interest rates. China’s policymakers have done so because they realize that rising prices for food and housing have a real possibility of hampering that nation’s outstanding economic growth.

If we see more weakness in the Chinese stock market due to growing inflation, that could change the complexion of the bull market here at home. That’s because a general decline in stocks in one of the world’s biggest economies could put pressure on export-related companies here at home. In fact, more selling in China could be the catalyst for a pullback in the U.S. market off of its current highs.

The good news is that I would consider such a pullback an opportunity to get into stocks at an attractive price. This is definitely a trend I’ll be keeping a close watch on in the weeks to come, so stay tuned!