A 40-year-old joke asks, “What do you call five American diplomats clinging to the runners of a helicopter in liftoff?”

Answer: “An orderly withdrawal from South Vietnam.”

The punch line, referring to filmed images of the urgent U.S. evacuation of Saigon, mocks official euphemisms that downplay the chaos and desperation of a fast-moving debacle.

But that humiliating exit also undercut the general concept of “containment” – the idea that dangerous forces could be held at bay with aggressive countermeasures.

In China today, authorities are trying to contain a runaway selloff in the wild mainland stock market that has dropped the main index of Shanghai (000001.SS) and Shenzhen (399108.SZ) stocks by more than 30% in a few weeks. The central bank is funding stock purchases and hundreds of stocks halted for trading. And they’re using oddly gentle language to describe the situation.

The Chinese stock regulatory agency stated: "At the moment there is a mood of panic in the market and a large increase in irrational dumping of shares, causing a strain of liquidity in the stock market."

Well, if it’s only a momentary irrational mood, then surely it will pass soon, right?

More seriously, the question of just how contained the treacherous, unruly Chinese stock market is from U.S. markets, is a real and important one right now. “Contained,” as we know, now has an unreliable connotation after it was used to describe the subprime mortgage mess before the financial crisis.

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It’s interesting that the bear assault on China shares has merely dropped the benchmark CSI 300 index (000300.SS) – roughly tracked by the ETF under symbol ASHR – to levels it first reached on March 16. It so happens that the American S&P 500 (^GSPC) tradeded that day at 2081 – exactly where it closed on Tuesday.

Yet in the interim, the Chinese market surged 46% into its June high before collapsing by 32% since. The S&P, over that same time barely budged – rising a mere 2.3% to its high and then slipping around 3%. In the eight months before the CSI 300 and S&P 500 got to those March levels, the China index had soared 68%, and the U.S. index just 6%.

So if the U.S. market never caught the benefit of the explosive surge in Chinese equity-market values, why would the violent unwinding of this overheated rally matter terribly much for American investors – who generally aren’t significantly invested in the mainland market?

Based on the ugly action in oil (CLQ15.NYM), base metals and other raw goods lately, it seems markets are inferring at least something about China’s growth prospects and industrial appetite from the market action.

It’s hardly clear that this makes sense. But perhaps the key point is that the unhinged market action in China has shown that Chinese government control of its economy and markets is far from predictable and complete.

There’s also the effect on market psychology, with Chinese market carnage sharing screen time with the exhausting Greek standoff. No one is saying China and Greece “don’t matter.” But there’s a lot of room between something not mattering at all and mattering above all else.

Thanks in part to the unnerving global news flow, the American investor mood is far more dour than one would expect given the relatively small drop in the headline indexes. The CNN Money Fear & Greed monitor, a measure of market-based indicators of risk appetites, is at 12 on a scale of 0-100, showing Extreme Fear.

All else being equal, this is a positive for stocks’ ability to withstand further negative news and suggests that there’s a chance yesterday’s strong positive reversal in stocks could become more than a reflex bounce.

We have earnings on the way, Federal Reserve minutes from the June meeting to be released and a speech Friday by Fed Chair Janet Yellen.

If nothing else, it should give us all something to talk about besides rampant asset liquidations across the ocean that may or may not be contained.

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