Markov Points To More Hang Seng Downside

We like to look at an alternative direction signal called the Markov process and what it is telling us today - there is more weakness ahead for the Hong Kong stock market even though it just set a 52-week low at 23,475.26. We calculate Markov values for the past 5 years and those older values - along with more current data - help create two state signals that, when they cross, can often give you a sense of price direction - especially if they cross and remain in their state for a period of time.

For the Hang Seng index, notice what happens with the price of the index when State 1 crosses State 2 - you see sustained downward price movement.