Abstract: This paper applies performance cycles to the top 100 stocks of Toronto Stock Exchange. The idea of time cyclicality and performance cycles has been explained as a method of market cyclicality in the following academic papers and published literature.

1: The Divergence Cycles0
2: The BRIC Model from a Japanese Perspective – Pre and Post Financial Crisis Review and Forecasts1
3: Time Fractals2
4: Temporal Changes in Shiller’s Exuberance Data3
5: Time Duration Decay in Romanian Capital Markets4
6: MTA Knowledge base – Performance Cycles5
7: Mean Reversion Cycles6

In performance cycles, assets are ranked based on price performance or any other fundamental or statistical parameter.  Performance like everything else is driven by time cyclicality. The asset rankings take the form of an oscillator, which moves from 0.1% to 100% for a group of 1000 assets. The performance cycles can be drawn form any time frame starting 1 min to multi years. In this report performance cycles for stocks on TSE are illustrated for minor, intermediate and primary time frames. Performance cycles nest like a hierarchy of various degrees.

Fig1. Performance is hierarchal

Ranking the assets.

We ranked the following assets. YELLOW MEDIA, ENERPLUS CORP, LOBLAW COS LTD, MANULIFE FINL, PENGROWTH ENER, CI FINANCIAL, URANIUM ONE, PENN WEST PETR, BROOKFIELD PRO, BONAVISTA ENER, SUN LIFE FINL, BELL ALIANT, PETROBAKKEN EN, WESTON LTD, ARC RESOURCES, INTACT FNCL CO, CDN TIRE CORP, GREAT-WST LIFE, TELUS CORP, VALEANT PHAR, TRANSALTA CORP, THOMSON REUTER, CAMECO CORP, MAGNA INTL, POWER FIN CORP, ALIMENT TD B, IGM FINANCIAL, CENOVUS ENERGY, RIOCAN REAL UN, CDN UTILITIES, TRANSCAN CORP, CDN OIL SANDS, BCE INC, NEW GOLD, CURRSHS CAN DL, TIM HORTONS,   ENCANA CORP, GILDAN ACTIVEW, FINNING INTL, BK NOVA SCOTIA, YAMANA GOLD IN, FORTIS INC, CDN PAC RAILWY, METRO A, LUNDIN MINING, EMERA INC, INTER PIPELN U, PEMBINA PIPELI, ONEX CORP, VERMILION ENER, PAN AM SILVER, ROGERS COMM B, SAPUTO INC, WESTERN COAL, VITERRA INC, SHAW COMM, TECK RESOURCES, CENTERRA GOLD, GOLDCORP, CGI GRP CL, BARRICK GOLD, NIKO RES LTD, IAMGOLD CORP, TORONTO DOM BK, FRANCO NVDA CO, KINROSS GOLD, BAYTEX ENERGY, SNC LAVALIN, BOMBARDIER B, IVANHOE MINES, CDN IMPER BANK, FAIRFAX FNCL H, FST QUANTUM MI, SHOPPERS DRUG, POWER CORP CAN, BK OF MONTREAL, INMET MINING, AGRIUM IN, NEXEN INC, ELDORADO GOLD, ENBRIDGE INC, NATL BK OF CAN, ROYAL BK CAN, AGNICO EAGLE, SILVER WHEATON, IMPERIAL OIL, HUSKY ENERGY, POTASH CORP, SUNCOR ENERGY, BROOKFIELD AM, TALISMAN ENERG, CDN NTL RAILWY, RESEARCH MOTIO, EQUINOX MNRLS, SINO-FOREST, PETROMINERALES, CDN NATURL RES, CONSLDTD IRN M, OSISKO MINING, CRESCENT PNT, PACIFIC RUBIAL

Fig2. Toronto 100 with FXF (Canadian Dollar ETF) ranked based on performance for 3 months

Source: Authors work. Data provided by Thomson Reuters

Ranking the assets – II

The high ranked assets are outperformers over the last 3 months and the low ranked assets are respective underperformers. These rankings move cyclically and create performance cycles for individual assets on different degrees of time. Below we have illustrated the rankings of 3 month and 6 months together. A stock could be the best performer over 3 month but not best over a 6 month period.

Fig3. The ranking in percentile over 3 and 6 months.

Performance Cycles – If we look individually at the stock rankings for 1 month, 3 month and 6 month, the create performance cycles. The left hand side is the percentile. The right hand side is the price. The performance cycles of 1 month (red), 3 months (blue), 6 months (grey dashed). The cases illustrated here take three stocks PWT, UUU and AEM. These are extreme performers and according to performance cycles extreme performers in a group of assets should see a reversal in performance. The top performer should underperform and vice versa. We have marked red arrows when the 1 month (red) cycle pushes below the 3 month (blue) cycle from high rankings and when the large 6 month (grey) cycle is also pointing lower. In case the 1 month red pushes back above 3 month, the trade is closed and reinitiated again if the initial condition persists.

Performance Cycle Cases on PENN WEST PETR, URANIUM ONE and AGNICO EAGLE

Performance Cycles for IVANHOE MINES (IVN.TO), CDN OIL SANDS (COS.TO), YELLOW MEDIA (YLO.TO), MANULIFE FINL (MFC.TO), CI FINANCIAL (CIX.TO), POTASH CORP (POT.TO)

Conclusion.

Performance cycles are a method of illustrating asset seasonality on a multiple degrees of time. When as asset reaches an extreme above 90% performance or sub 20% performance, the asset performance reaches an extreme and which makes it prone to reversal in previous trend. The performance cycles can assist in sector selection, stock selection, risk management, model portfolio construction and of course trading. Below we have tabulated the rankings in percentile of 3 month and 6 month for the assets under study.

Bibliography – Index

1: The Divergence Cycles0

2: The BRIC Model from a Japanese Perspective – Pre and Post Financial Crisis Review and Forecasts1

3: Time Fractals2

4: Temporal Changes in Shiller’s Exuberance Data3

5: Time Duration Decay in Romanian Capital Markets4

6: MTA Knowledge base – Performance Cycles5

7: Mean Reversion Cycles6

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Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.