Archive for September 16th, 2011

The Ising Model

The Ising model is a mathematical model of ferromagnetism in statistical mechanics. The model consists of discrete variables called spins that can be in one of two states. The spins are arranged in a lattice or graph, and each spin interacts at most with its nearest neighbors. The goal is to find phase changes in the Ising model, as a simplified model of phase changes in real substances.

In 2000 while working on the Murphy’s Price – Volume – Open Interest I started scribbling arrows in a 3 by 3 grid writing about how Price – Volume – Open Interest (PVO) should define trends. The PVO model looked like an Ising model.

 

 

Today I will try to explain the 10 year old analogy. In an antiferromagnet there is a tendency for the intrinsic magnetic moments of neighboring valence electrons to point in opposite directions. When all atoms are arranged in a substance so that each neighbor is ‘anti-aligned’, the substance is antiferromagnetic. Antiferromagnets have a zero net magnetic moment, meaning no field is produced by them. Antiferromagnetism can be considered like a neutral market as anti aligned spins (Fig. 1) are similar to non confirmations. Many non confirmations also mean undecided market.

From a PVO perspective, it could be a stock with a positive spin and another with a negative spin causing the aggregate market to be neutral.With the passage of time the neutral situation leads to a topping or bottoming situation, in other words a market bias, spin, direction, Ferromagenetism. A topping, where a market reverses direction sees the price pointing lower, volume leading higher and drop in open interest position (as longs square off – Fig 3). On the other hand a bottoming market ready for reversal is when the prices point up, volumes are still lackluster and negative, but open interest starts to build up new long positions (accumulation – Fig 2). This confirmation among stocks finally gives a negative and positive bias to the market. This is how stock markets could have a physics parallel in the Ising model spins. The Ising model could also validate the weight of evidence approach in technical analysis.

This article was written for ATMA.

 


Author: | Date: 16 September 2011 | Comments (0)

Categories: Analytics, ATMA, Time Triads

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Why is ATB the best Romanian stock?

There are a few reasons. First, the Price to Book ratio of the stock is below 1. So it’s worth more in cash that the price it’s trading for. One would say that’s true for many other stocks in the market today. Let’s look at some more reasons. The stock Beta (a measure of sensitivity compared to the market) is also below 1. This makes the stock less volatile. Hence not a darling of speculators who seek fast gains. Less than 1 beta stocks are for investors and for risk reduction in portfolio. Third, Jiseki cycles are coming out of the worst ranking.

Any stock at such low rankings is already at it’s worst and a high potential accumulate. Fourth, technically it looks like a bottoming stock till it remains above 0.4. These are key Fibonacci retracement supports that should hold. The latest alpha carries the late economic stocks, unlike the ATB and TGN not many other late economic utility stocks look bottoming. BETNG Jiseki is still negative and SNP and RRC still have more negativity lying ahead.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings of 0 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform.

Alpha is a daily strategy signal product that gives trading and investment signals. Alpha is a numeric Ranking product based on TIME fractals. The signals are 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. Alpha is a part of the time triads analytics developed by Orpheus Research.

Coverage Romania: Romanian stocks, Indices and currency.


Author: | Date: 16 September 2011 | Comments (0)

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Categories: Alpha Romania, Research Updates

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