Archive for March 14th, 2010

Channels.India - HDFC Anticipated and happened

HDFC DAILY Anticipated and happened Prices continued to push higher after completing the W-X-Y corrective structure down and now broke 0.618 key FIB resistances. Key 2,700 levels (previous highs) are the last resistances standing before we consider the current upmove a new impulse higher. HDFC BANK DAILY Prices pushed higher till previous highs near key 1,850 levels. A clear break here would give us further positive confirmation. Performance cycles also suggest further outperformance.

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‘Performance cycles’ is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves from 1 to 30. 1 is top relative performance and 30 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick.

CHANNELS.INDIA is our second perspective product published on MONDAY, WEDNESDAY and FRIDAY. The report uses conventional technical tools and covers most top traded stocks. The report illustrates key price levels, price targets, price projections and time turn windows. WAVES.INDIA, CHANNELS.INDIA are bundled together as PERSPECTIVE products. Unlike WAVES which focuses more on blue chips, CHANNELS covers the other mid cap and small cap stocks also. CHANNELS.INDIA carries the Early Economic cycle sector components, which includes FINANCIAL and DISCRETIONARY sector stocks, the Mid Economics cycles sector which includes INDUSTRIAL sector stocks and the Late Economic Sector cycle including ENERGY, STAPLES, UTILITIES, PHARMA, CHEMICALS sector stocks. REUTERS EARLY ECONOMIC RICS DLF.NS, HDFC.NS, HDBK.NS, ICBK.NS, SBI.NS, INFY.NS, TCS.NS, MAHM.NS, UNTE.NS, TITN.NS REUTERS MID ECONOMIC RICS ASOK.NS, TAMO.NS, CROM.NS, BHEL.NS, LART.NS, MTNL.NS, IDEA.NS, BRTI.NS, RLCM.NS, TATA.NS REUTERS LATE ECONOMIC RICS ONGC.NS, RLIN.NS, NTPC.NS, ACC.NS, HALC.NS, TISC.NS, ABUJ.NS, CIPL.NS, RANB.NS, ITC.NS

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Alpha India updated

Performance cycles I

Performance cycles II

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%

Performance cycles is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves in a range say from 1 to 30. 1 is top relative performance and 30 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick.

*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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Can Time Triads create the head and shoulder fractals?

Time Triads recreating head and shoulder fractals is a step closer to rewriting the Elliott Wave Theory.

We have talked about head and shoulder on prior occasions. We have also mentioned that time is a head and shoulder. The time pattern was first illustrated by Tony Plummer in his book. Plummer mentioned that a stylized pattern of time was a good example of fractal geometry.

Tony Plummer’s Stylized Time Pattern

He did not give a formal pattern proof of creation for the stylized pattern. Where did the stylized pattern come from? How could it be seen across time frames? And how was it fractalled?

Orpheus Introduces TIME TRIADS

Here we have taken the Orpheus Time Triad unit and reworked on it to create the stylized pattern Plummer first illustrated in his book. The stylized pattern looks like a head and shoulder. Time Fractals, Time Triads, Time Arbitrage, Econohistory, Performance Cycles are terms coined by the author in Jan 2009.

The idealized time triad structure is made of equilateral triangles. There are three equilateral triangles, making a larger triangle and so on. Time subdivides in three and multiplies in three. What is with the formation? First and foremost: Head and Shoulder are three peaks, a large peak centered around two smaller peaks. Head and shoulder pattern is the time triad i.e. three triangular peaks. Did you ever think why a day has four prices, the open, the high, the low and the close? We just take it as standard. Ok! it does look logical to have the O-H-L-C, but the interesting part is how this classification divides the trading session into three parts. There is a part with the open and high, high and low, low and close. The three triangles of head and shoulders are there. Market literature is full of pattern ideas from human anatomy. It’s not that just chance that we find similar patterns in markets like we find in human anatomy. We find head and shoulders in markets just like we see it in human body is because time touches anatomy, the same way it transforms price.

Nature unlike markets doesn’t just move in the first Cartesian quadrant with positive x and y axis values. Nature moves in all dimensions, in free space. Fabian Helge von Koch (1870 – 1924) was a Swedish mathematician who gave his name to the famous fractal known as the Koch snowflake, one of the earliest fractal curves to be described. The Koch snowflake (or Koch star) is a mathematical curve and one of the earliest fractal curves to have been described. It is based on the Koch curve, which appeared in a 1904 paper titled “On a continuous curve without tangents, constructible from elementary geometry”. The Koch curve starts from a Triangle and in the second iteration divides each side of the triangle into a head and shoulder form. The iterations are repeated and this creates the Koch curve. Koch curve is a zooming head and shoulder bombarding in your eyes like a moving spatial star field.

The Head and shoulder pattern can even rewrite the Dow Theory and even explain the Elliott Theory. Elliotticians are known to famously quote that there are few rules in markets, mainly the EWT (Elliott Wave Theory) works on guidelines. The only two rules in the long standing Elliott Theory is that the 3rd wave is never the shortest of the three impulsing waves 1, 3, 5. What Elliott unknowingly said was that the three up legs in a five legged market structure have a bump or a head, simply putting the middle part of a market fractal is larger than the other two. The 3rd is never the shortest because of the Head and Shoulder. The pattern of time rules the Elliott fractal. There is another rule of Elliott that the 2 wave does not make a new low below the low of 1. The head and shoulder pattern of time also makes higher lows and not lower lows. A higher degree of time does indeed make more significant lows than its small degree counterparts.

So what did we do with the Time triads? We gave the smallest triangle a size of 1 unit (X). 3 units made a larger triangle (3X) and nine units made the larger triangle (9X). At all times these unit lengths are adding or subtracting. Assuming there is no translation. That is largest time is not effecting the smaller time. Putting simply the bear market is the same in potential and scope as the bull market, the markets will behave ideally, losing all the gains it made, a classic cycle.

Doing an aggregation of three degrees viz. X, 3X and 9X, we reached the Head and shoulder pattern. And as we added a higher degree head and shoulder fractals started to form.

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Can the dollar index reach 200?

The 1980s high was 150, talking about a 200 dollar target is much beyond the euro-dollar parity. What could be a few reasons a target beyond previous high at 150 may start assuming some probability? First: Dollar Index has made an average 15 year cycles starting 1970′s. A bottoming cycle in 2008 at least suggests multiyear strength well into 2012. Second, Oscillators have made a multiyear non confirmation of more than a decade. Non confirmations of such large time frames could validate the time cycle case. Third: The formation from the 1985 looks more like a completing corrective than a trend. This means even if we assume an ongoing counter trend, prices could reach back to previous highs at 150.

Further questions which come to mind are how can dollar rise, while commodities also strengthen? What happens to the US crisis? We don’t have answers to these questions yet. But what we can tell you is that time cycles might lead, lag and adapt to intermarket conditions. How time cycles do it remains to be seen.

Key levels to watch lie at 80. Above 80 the surprise of the decade is probable.

TICKS.GLOBAL - 01.04.10 07:41 (GMT) EURUSD. QUARTERLY. Momentum is one way to see TIME CYCLES. The current quarterly setup, retest of multi decade support at 1.34-1.35 and RSI momentum testing key supports suggest that we need more than a Greece bailout to stop EURUSD to fall till 1.2. All bounce backs remain corrective countertrend for us till 1.38 is clearly taken out.

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