Archive for June 6th, 2010

Channels.India - Early economic correctives up

SBI 60MIN Prices seem to be completing another corrective leg up. Key resistances lie at 2,350-2,400 levels. SBI is still the top potential underperformer stock for the weeks ahead.

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





Alpha India: Maruti outperformance begins

We have been mentioning in our latest Alpha India reports that we are expecting new entry signals in the case of the long Nifty – short HDFC, short Nifty – long Maruti pairs. The signals have come as anticipated and we started the respective pairs. We also have a fresh signal for the long Maruti – short SBI pair. The two stocks are at extreme rankings and we expect Maruti to outperform not only the broad market, but also our top potential underperformer, SBI.

We closed the Nifty – Hero Honda pair at a stop loss, the Nifty – Bhel at a marginal 5% gain after it failed to deliver sizeable divergence in 100 days. The performance cycles of Bhel has bottomed. Nifty – Infosys pair at 0% as it has been running for 77 days. The rest of our pairs are running positive. Nifty – Tata Motors gains have dropped to 3%, but performance cycles continue to suggest that Tata Motors underperformance should continue and we should see larger gains in the respective pair. Tisco –Sterlite and Nifty – ACC are up 12% and 16%, respectively.

On the sector side, FMCG remains at the top, meanwhile Metals has pushed lower to the bottom. We also carried the tracker for our sector specific pairs that we have been mentioning in our mid week special reports. We carry a special update on Hero Honda in the report.

The latest Alpha India carries long only - short only signals, pair tracker, numeric ranking, numeric ranking changes, performance cycles.

For more information on Alpha India mail us at [email protected]

Performance Cycles - I

Performance Cycles - II

Michesan Anna-Maria, the columnist for the WAVES.INDIA weekly and Head of India Research. Anna discovered her interest of markets immediately after completing her graduate studies in Economics. She followed it up with post graduate studies in corporate finance. A host of research work in behavioral finance, option strategies and quantifying market sentiment followed. Anna covers Indian equity and combines Elliott, Time Fractals and Time Analytics to deliver accuracy across time frames. To review some of her work, check out the annual India accuracy report 2009.

India Accuracy Report 2009
Alpha India

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.

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.

Time arbitrage portfolio legs should be risk weighted before any implementation.
Coverage India: BSE Health Care and components
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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The failed state

The failure of state is a cyclical event connected with debt. The reason we are never prepared to handle it is because we as a society are cycle blind.

A search on “state”, “failed state” will bring out search results like real estate, United States, state insurance, anything but the idea of state. It’s not only on the world wide web, but even real societies that still struggle to accept the idea of a failed state. Now that Hungary’s potential default is in news, the question how the state managed to fail is pretty relevant.

Why does a state fail? What does failure encompass? Is it just about payment defaults, cutting pensions, being unable to generate jobs or growth, failing the poor, failing the trust of its own people or it something cyclical? It’s not the first time politicians failed the people. In an article written by Martin Armstrong in 1991 ‘The Cycles of Political and Economic Change’ in the Cycles magazine, the author quotes Cicero before the senate of Rome in 63 BC. “The budget should be balanced, the treasury should be refilled, public debt should be tempered and controlled, and the assistance to foreign lands be curtailed lest (we) become bankrupt.”

Armstrong wrote in 1991 “These words serve as a fresh reminder of cycles, no matter how much we believe things have changed, indeed, much remains the same” Looking at the current state of affairs, the only thing which comes back is the cycle. The issue of debt has been with man from the beginning of time. Though popular belief holds that prostitution is the oldest profession, the banker (money lender) is truly the oldest profession.  Man’s history of debt is a history of crisis. Virtually every known war has been fought for economic reasons, usually disguised by some noble saying or religious slogan. But without hardship or greed, there would be no incentive for war.

The Soviet Union break up was a direct result of economics and the crisis is debt that the communist government managed to create. The American Revolution was fought for economics. Saddled with escalating debt, England levied excessive taxes on it’s colonies. Worst yet, it demanded that the colonies pay all taxes in gold, while England paid for colonial goods in copper. The king sought to bleed colonies to reduce his debt at home. That unfair policy, born from a crisis in debt, sparked the American Revolution.

Raymond Wheeler’s 300 year cycles based on his many years of research into cultural cycles and the recurring cultural curve mentioned that culture is revived in a Renaissance of classical, idealistic themes. Tyranny prevails as the state becomes dominant over the individual. During “cold” epochs, civil rebellion ushers in democratic reform and a revival in importance of the individual.

Thomas Jefferson said, “Man cannot be trusted with the government of himself.” History has answered Jefferson a thousand times with a cycle of unqualified regularity. No matter how noble a form of government starts out to be, it always degenerates into the very thing it was created to replace. I believe there are more instances of the abridgement of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.

All forms of governments start our as benevolent seeking to correct the evils of its predecessor. But given enough time “silent encroachment” takes place.  Looking at history, mankind acts like a dog chasing its own tail, running around in endless cycles.

End of Roman Empire, the year 476 is generally accepted as the formal end of the Western Roman Empire. That year, Orestes refused the request of Germanic mercenaries in his service for lands in Italy. The dissatisfied mercenaries, led by Odoacer, revolted, and deposed the last western emperor, Romulus Augustus.

The fall of the Ottoman Empire can also be attributed to the failure of its economic structure, with the size of the empire creating difficulties integrating its diverse regions economically. Also, the empire’s communication technology was not developed enough to reach all territories. In many ways, the circumstances surrounding the Ottoman Empire’s fall closely paralleled those surrounding the decline of the Roman Empire, particularly in the ongoing internal tensions. Similar internal tensions brought the Spanish empire down.

The failure is connected with mass psychology, which at one stage wants to be lead and at one state wants to be lead. The failure is linked with problems of a large economy which fails to grow beyond a stage and starts to exhaust. But more than anything the failed state is connected with the failure of character of our leaders, who start on a good note but end up undoing the same good intentions. A failure of state starts with debt and ends with debt. The best part is that it’s all cyclical, forecastable and hence avoidable to the extent of reduced pain. The worst part, majority of us move up and down as the time cycle dictates, punishing us for being cycle blind.

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