Archive for December 13th, 2010

Santa Claus Rally

RSR readings of a month may not the best tool to predict an end of the year rally also called as Santa Claus Rally, but they definitely tell us how sustainable any rally is, going ahead into 2011. The rolling 6 month sentiment  remains overextended and topping. This tells us that any bounce backs should remain weak going into 2011. This puts any Jan first week rally doubtful.

Markets have an ability to trash general beliefs. One of the belief was that year ending in 10 are negative. The whole year has come to the 10% upside on Dow Jones and BET. Whether markets end the year negative or not remains just simply statistics. Such small changes throughout the year makes it a stagnant 2010 and not a positive or negative year.

What did the year teach us? It teaches us that just like buying into sentiment low in Mar 2009 was an opportunity, it was the Jun-July RSR sentiment readings low in 2010. It also tells us that extending 6 monthly sentiment does not make an accumulate case just yet.

Markets will always test patience. They will always fall asleep tricking you into doing the same. They will always move faster than you when they trend. Understanding market means time efficiency. If you don’t understand time, you may always be running in a labyrinth you can not solve.
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Will ATX Vienna underperform Romanian BETFI?

Starting Jan 2010, ATX has outperformed Romanian BETFI. After 12 months the Rieki performance cycles are extending to the other extreme. Performance is cyclical, so ATX doesn’t have a long way to go in terms of outperformance against Romanian BETFI. The cycles will reverse and ATX will underperform BETFI.  At this stage ATX is running a positive signal on LOSO. While BETFI is still negative.
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Time to short auto, long oil?

If you superimpose two charts of BSEOIL and BSEAUTO together, you will see two similar looking charts with increase and decreasing gaps between them. Just by looking at charts one can attempt to judge outperformance and underperformance of the respective sectors, but it’s not easy. This is because Elliott waves can extend, oversold assets can remain oversold or stagnant for a longer time and trendline breaks may not give sustained reversals.

To improve on this ability to judge performance technicians use relative performance. This is a ratio line, which indicates whether the ratio between two assets is rising or falling. A falling ratio is underperformance for the Numerator asset and vice versa.

In the case illustrated here, we have the ratio line …

This article was written for Association of Technical Market Analysts

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.

Coverage India: BSE500 traded stocks and Indian Indices.