Imagine the economic havoc that could spring from the following nightmarish scenario: Cities are barricaded, preventing passengers from leaving disease-affected urban centers. Trucks are prohibited from engaging in intercity travel, blocking deliveries and normal commerce.

Metropolitan health care systems barely function because of high levels of infection, illness and death among medical workers. Maritime and aviation crews are detained and tested for infection. Flights get postponed.

Domestic life is interrupted. Students are told to stay home for weeks on end, disrupting families and education plans. Cafes, discos and entertainment venues close. Tourism drops to nothing. Then, with thousands quarantined, riots in multiple townships break out.

This is something like the situation in China, home to two-thirds of the world's known SARS cases. While other nations appears to be beating severe acute respiratory syndrome -- Britain, the U.S. and Vietnam were recently removed from the World Health Organization's list of SARS-affected countries -- China's situation remains tenuous.

On Monday, China said nine more people had died from SARS and that 160 more were infected with the virus. And the Chinese health statistics still might not properly convey the magnitude of the epidemic, since the government only recently acknowledged the severity of the situation and proclaimed it would begin dealing with the crisis openly.

Openness about the disease remains only one of many steps required to contain the outbreak. A larger fear is that China doesn't have adequate medical facilities and personnel to manage the disease should it spread to the vast rural hinterland. Cases in poorer, rural areas are turning up. But according to some reports, poor people bearing SARS symptoms are being turned away from hospitals, since it's suspected they won't be able to pay medical bills.

Even if Beijing manages to quickly contain the epidemic, some economists say the disruption will slice at least 2 percentage points off the country's projected 8% economic growth rate this year. Both cotton and copper will likely also suffer.

Still Threatening

China is the world's largest producer and consumer of cotton. It is also the largest importer of the fiber, since it doesn't produce enough to satisfy its needs. The U.S. is the world's biggest cotton exporter and unloads a large chunk of its production in China. Any threat to the Chinese demand, such as a downturn in economic activity there, is a potential threat to the price of cotton in the U.S.

Indeed, July cotton (CTN3:NYBOT) broke down Monday in one of its biggest declines in years. While the heavy dose of selling off the double top is reaching into oversold territory now, the die is cast, and cotton is a downside momentum market. Any reaction rallies should be sold.

Fast economic growth over the past decade has also made China a heavy user and importer of copper. The projected drop in Chinese GDP is likely to hurt global prices. July copper (HGN3:COMEX) is in a similar set-up to cotton, in that it too is sitting at a multimonth low after descending from a double top.

However, copper didn't crack below support Monday, meaning there's still the opportunity to participate in any breakdown that might occur from the current low-level consolidation.
Marc Dupee is an independent trader and co-author of the book The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to Marc Dupee.

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