There was one thing missing from the last few week’s rankings. It was the fact that technology sector CNXIT was still low in rankings. Technology is a leading sector, which gives market direction. The respective sector heading into top three performers suggest that the leader is finally taking its preferred slot, getting ready to hoist the topping flag for Indian markets. If we sound biased, look at the small capitalization sector Index . The index is made of the so called junk stocks, which lead at market tops. Look at the 2007 top and you will get similar small cap and mid cap leadership in performance. Small cap leadership can’t take us anywhere, but down.
On the pair side we have illustrated two pairs long Hdfc bank, short Icici bank and long Grasim, short L&T. The pairs were running from 5 Oct to 11 Dec and from 11 Dec to 7 Jan (still running). The pairs delivered 14% (69 days – annualized 78%) and 28% (63 days – 163% annualized) respectively.
Among stocks, the top performers for the week are auto stocks viz. Tata Motors, M&M. Four of the top 14 ranked stocks are metal majors (Tisco, Sterlite, Sail and Jindal Steel). The top ten also includes the tech majors viz. Infosys, Tcs and Wipro. All these top ranked stocks are the potential underperformers for the weeks ahead and should be excellent short opportunities, now that we have reinforced our topping scenario for the market.
Reliance Infrastructure, Maruti and HDFC are at the bottom of numeric ranking and remain the top potential outperformers in the weeks ahead. On the sector front, markets witnessed a clear rotation in the rankings. technology (CNXIT) and mid cap pushed higher from the lower rankings, while banks and consumer durables pushed lower to the end of the list.
Remember selling in strength is not easy, but is the best risk – return opportunity. For further timing on Alpha India stocks subscribe to other Orpheus India research products like Waves, Channels and Intra day TICKS. For trading strategy based on performance cycles and more information subscribe to Alpha.India.
Strategy update
Numeric Ranking NIFTY 50 and performance cycle for TCS
Performance cycles
Download the latest report ALPHA.INDIA.140110
ALPHA is a pair trading, long only – short only strategy and Numeric Ranking product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.
TIME ARBITRAGE portfolio has 18 pairs CNXIT-NIFTY, RELIANCE-NIFTY, TCS-NIFTY, ONGC-NIFTY, INFOSYS-CNXIT, ONGC-RELIANCE, HDBK-ICBK, BHEL-ACC, GRAS-LNT, HLL-ITC, SBI-HDFC, NIFTY-STERLITE, NIFTY-HDBK, SBI-NIFTY, BHEL-NIFTY, NIFTY-ACC, TCS-CNXIT and SBI-HDBK. Minor degree averaged 10-30 days and intermediate degree trade averages above 30 days. The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. CNXIT/INFOSYS +A-B means LONG CNXIT, SHORT INFOSYS. While CNXIT/INFOSYS –A+B means SHORT CNXIT, LONG INFOSYS.
LONG ONLY, SHORT ONLY portfolio covers NIFTY, CNXIT, NSEBANK, RELIANCE, INFOSYS, ONGC, CIPLA, ICICI BANK, HDFC BANK, TISCO, BHEL, ACC, GRASIM, L&T, HLL, ITC, SBI, HDFC, STERLITE
STOP LOSS AND EXITS are activated at 4%
*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.
Time is a social construct and we see time through the life and nature around us. Understanding time can not only give a unifying theory to research of a few thousand years, but also help us understand the world we live in. Time evolves, oscillates and continues. Time comes before everything, but we don’t see it. We just feel it. We believe what we see and this is why understanding what we don’t see is a challenge. Understanding time could bring more than a conventional thought down, it’s a revolution, which could rock the very foundation of economic thought or the geometric structures Euclid laid down in 300 BC. We are at the start of the journey, but if time is indeed the real mathematics, we could see high accuracy in time forecasts.
Econohistory is the study of performance cycles between assets. Cycles are the generic name for time fractals. Performance cycles can be studied for any time frame, for as small as a tick data to multiyear time frames. This objective approach to performance cyclicality can explain why intermarket analysis is an area of study? Why bonds and commodities tend to be inversely related? What is the connection of Oil with world markets? Why the world watches DOW sometimes and sometimes a 500 point effect on DOW seems to have no impact? Why correlation between assets moves from near perfect at times to weak correlation at other times? Why the same news has different impact on a stock or market? Why equities and bond trend together and why the relationship decouples sometime? When will inflation become deflation, disinflation, stagflation or hyperinflation? When and why does gold outperform and underperform silver? Econohistory can objectively answer these questions, using performance cycles, time fractals and past data. Economic history is mathematical.
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