Hang Seng Long Term Rangebound View - Technical view on China

19 Jun 2018

Just a reminder that HSI has been range-bound since 1997. It has ridden above the top end of the range twice, but both times (2008, and 2018) it reverted back. If it proceeds to draw down excessively from here, it'll be the second crash from elevated levels. The smallest drawdown has been 36%.

Also worth mentioning is that each time the HSI has drawn down, it affected US markets as well, or coincided with domestic recessions (2000, 2008, etc).

19 Jun 2018

Nota

One important note - when HSI touches the pink line, that almost perfectly timed the market tops in 2000, in 2007, and also timed the 2015 market and 2010 market tops.

Also, when HSI touched the bottom part of the channel, it has almost perfectly called market bottoms where relevant. The only false positive here is 2011, where it never reached the bottom of the channel before heading back towards the top.

If you were to literally employ a strategy of LONG SPX until HSI hits the pink line, then short HSI until it his the bottom pink channel, you would have had insane returns. Obviously hindsight, but lets see if this doesn't still work.