Yet, as we learned in the movie "21", where six MIT students team with Micky Rosa to become expert card counters and "bring down the house," this highly illegal technique carries dire consequences.
You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing.
One "card" worth counting is the Purchasing Managers' Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.
There are three different types of indicators: coincident, lagging and leading. PMI is considered a leading indicator, meaning its movement historically occurs three to six months before the market reacts.
In China, the PMI just crossed above the three-month moving average. Historically, there's a 67% probability that Hong Kong and China stocks, as measured by the Hang Seng Composite Index, will trade higher over the following three months when this happens. So far in October, the index is up 3.2%, and if this historical trend is sustained, we should see continued positive performance.