Archive for March, 2012

Long Wheat, Short Silver?

 

We at Orpheus are commodity bulls. A commodity is a generic term used for a group of metals, energy and agro assets. Among the commodity complex itself, it’s important to understand how various components will outperform or underperform. A generic broad positive forecast, though useful does little to mitigate the overall risk that comes with large return divergence between assets.

To explain the divergence risk and differentiate it from a large commodity bullish forecast we analyzed nine commodity London ETFs viz. Wheat, Cotton, Corn, Gold, Platinum, Silver, Crude, Natural Gas, Gasoline and all commodity Index (AIGC.L). Three from this group were agro commodities, three were energy based, three were from metals complex and the tenth asset was a broad commodity index. We compared them from Jan 2009.

Natural Gas was the worst at negative 90%, wheat followed at - 42%. On the top tier was Silver at positive 196% with Gasoline at second best, delivering 154% for the period under study. Strangely crude, corn and commodities delivered 6%, 14% and 22% respectively over a similar period.

Even if we ignore the outliers i.e. Natural Gas and Silver, the commodity complex witnessed an inter commodity market divergence of 112% (Long Gasoline, Short Wheat). This was an annualized return of 37%.

To read the latest report download it from our Reuters Store or mail us for subscription details.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Dr. Ionut Nistor is the co-author of Performance Cycles paper published in Kyoto Economics Journal in March 2009. Ionut is a professor of Corporate Finance at Babes -Bolyai University and a post doctorate fellow at the Kobe University in Japan. He is fluent in Japanese, Romanian and English.

 

The Bric Model from a Japanese Perspective
Ionut Nistor - Econohistory


BSE500 Energy

 

Sustainable market reversal does not happen without a broad market support. To expect Nifty to reverse with underperforming sectors pulling it lower is wishful thinking. This Alpha we take the BSE500 Energy stocks that are above 70% in rankings. We compare them with our long only ideas BPCL and ONGC. What do we see? First unlike the Nifty true positive trendline breakout, IOC, HOEX and Gail have no such trendline breakouts. The stocks have a weak price structure. Second, when we compared Petronet vs. IOC, the former has outperformed the latter by 30% in the last12 months. This not only suggests inter sector divergence, but also that there is no sign of reversal for IOC yet. Stock selection can be reviewed if you change the comparison group. Understanding BPCL and ONGC as a part of CNX100 and then as a part of BSE500 suggests…

To read the latest report download it from our Reuters Store or mail us for subscription details.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage India: CNX100 traded stocks and Indian Indices.

Michesan Anna-Maria, 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.


Historical Call

 

This is what we wrote on 31 Dec 2008

Kitchin doubts Recession 09 - 31 DEC 2008 - INDIA - There is not one place where we have not seen a reference of a recession in 2009. CNN carried an increase in unemployment and recession report. We have many other newspapers and journals talking about the same idea. Bear markets or recessions doesn’t necessarily mean negative prices. Recessions of multi years in the 1970’s and 1990’s US bear market has seen market in a trading range.

The 3.3 year Joseph Kitchin cycle, also known as the inventory cycle is witnessed in stocks and indices worldwide. But emerging markets lack price history when it comes to blue chip and sector indices. One reason why researchers have made little effort to look at Kitchin cycles in the Indian context. We have attempted this on previous occasions. We even talked about the Kitchin cycle on Sensex (Beating the market), similar to one seen on DOW (CYCLES.GLOBAL.151208). The 3.3 or 36-40 month cycle recurs with uncanny succession. The BSE500 illustration here (SLIDE1) carries two KITCHIN cycles from SEP 2001. We have also carried the SENSEX KITCHIN cycle from 1992 ahead (SLIDE2). Both the cases suggest that markets have possibly hit KITCHIN cycle lows or is near it. This means that not only BSE500 broad market Index should head higher for the next 15-20 months but also the other indices. This defies all recession talk and might confound conventionalists.

But considering investors have reduce appetite for carrying equity market exposure for 20 months (half of 40 month Kitchin cycle), one can look at smaller cycles. Cycles are fractals too. We have subdivided the respective Kitchin cycle into smaller 20 month cycles (CYCLE HARMONICITY) to illustrate short time up cycles. Even this suggests 8-10 months of positive move.

We will review how the KITCHIN cycle unfolds in the Indian context. Meanwhile, we have carried some other sector indices with their preferred and inverted views. We still don’t see an intermediate reversal and continue to look higher. NIFTY breakup on 3,100 and Sensex move up above 10,200 keeps us looking higher. On the downside we need a clear break below 3,000 (NIFTY) and Sensex (10,000) to review our preferred positive stand. And just in case, it has missed your attention, the first five days of Jan were positive. What this means for JAN effect will also be posted in later issues

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Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


Chemicals (+short portfolio update)

 

We have filtered the BSE 500 stocks for best performing top ranked chemicals sector components. We have reviewed the respective stocks Jiseki cycles and screened ideas for new shorts. This is the third short idea screening we have done since 23 Feb. Barring ITC most of our shorts have delivered. We carry the short portfolio update in this latest ALPHA.

Mail us for subscription details or download the report from our Reuters store.

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


Time to Short?


Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage Global: Dow 30 components, Global Indices, ETF SPDRS, Commodities

Dan-Andrei Rusu graduated in 2005 the Faculty of Economics Cluj-Napoca, “Dimitrie Cantemir” University. In the same year he joined BT Securities as a financial analyst. He is currently the Head of Research at BT Securities and a speaker with Romanian Brokers’ Association. He is an MTA (Market Technicians Association, New York) affiliate and cleared CMT level 1 exam. He is a contributing columnist for Orpheus Capitals for the ALPHA GLOBAL INDICES.


Replacing the Index

Well of course there are reasons and rules for a stock components to make in and out of the Nifty.  But is the approach always objective? Asian Paints and Bank of Baroda replaced Reliance Power and Reliance communications in the Nifty. Lets’ review the changes according to Jiseki. Mostly like in life it’s the worst performer that gets kicked out. The Reliance stocks are the worst performers and hence got kicked out. However, both the stocks have positive Jiseki cycles and have indeed done better compared to the stocks that replace them (YTD).

So is there a pattern here? Yes, generally the stocks that get selected are the ones that are doing the best i.e. Asian Paints and BOB. Best not in terms of relative performance or YTD returns but best in terms of top or bottom of a group. Both the selected stocks have topping Jiseki cycles (top performers) and have negative Jiseki sell signals.  The latest ALPHA carries absolute and relative signals, technical cases and divergence plots to explain the running after winners approach of stock selection by the Nifty Index committee. And why it’s a subjective and inefficient idea.

To read the latest report download it from our Reuters Store or mail us for subscription details.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage India: CNX100 traded stocks and Indian Indices.

Michesan Anna-Maria, 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.


BSE500 vs. DOW

We are not out of the woods yet. Sensex seems to have completed a flat a-b-c corrective and still has further minor downside. Our longer term view remains positive till Nifty 5,100-5,000 holds. (Sensex 16,600). This week we compare Sensex with Dow to understand how is Sensex positioned vs. global markets and sectors.

On 24 Jan 2011 we said, “From Jun 2010 the DOW underperformed Sensex by nearly 25% till early Oct 2010. Since then the DOW has outperformed Sensex by 10% and the Intermarket Cycles trend remains in favor of Dow. ”

From Nov 2010 till date, Dow has outperformed BSE500 by above 30%. Dow continues to outperform BSE500.

In this report we have carried perspectives on various global indices, performance cycles and comparative signals between XRT (Retail Sector) and XLF (Financial Sector) and XME (Metals and Mining). The sector pictures continues to suggest that Metals and Mining sector remains weak while Retail consumption continues to thrive. Gold remains weak while Oil gets ready to move to historical highs.

 

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


Long Investment Ideas - II

On 15 Feb we talked about 4 investment ideas. All of them are positive month to date and barring one all of them are also positive year to date. We will review them at a later date when we integrate all the long investment ideas in a single long only India portfolio. Today we are discussing new long only investment ideas.

Q: Why are we discussing long only ideas?
A: Because there are always assets moving up (in a large group) irrespective of a large bear trend. The idea that 90% markets fall together with the market and vice versa becomes a false statement if instead of a daily performance, we consider a weekly performance.

Q: So is Nifty bearish?
A: No. The Nifty is bullish for us and we don’t think the index and the market is correcting beyond March and below 5,100 levels. We consider the ongoing down move as an accumulation opportunity. This is also the reason we are seeking long investment ideas.

Q: How do we select our stocks?
A: First we pick up a sector (Utilities, Electrical and Gas). Second, we filter out the worst performers. (Because worst performers outperform). Third, we check these stock for Jiseki bottoming cycles and running signals. Fourth, we test the stocks against BSE500 to check the long ideas for relative outperformance.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Avinash Barnwal is Master of Science in Statistics and Informatics from IIT Kharagpur. He has worked on human response time at Department of Psychology, University of Amsterdam.  Avinash is a Quantitative Analyst at Orpheus developing money management solutions and building statistical models to address temporal challenges.


The Aluminum Special

 

Timing is everything. Investing a quarter too early can influence the annual return on your portfolio. Now that Hindalco reached near 111 lows it reminds us of the great buy opportunity of 2009 when the stock was sub 40. Before we make our case for Hindalco whether to invest now or later, let us tell you some basic sentiment rules. Markets don’t give positive news when the stock is at lows or historical lows. Whether it’s slapping of fines or international Aluminum prices, don’t expect indications to be clear and confirming.

Seek insights rather than facts. It’s common sense that if Oil prices remain above dollar 100, alternative energy will benefit. It’s the same like saying that Aluminum prices have to stay higher for smelters to remain profitable. These are industry facts, where’s the insight?
Fundamentals could give some insight, but there are so many industry variables that just looking at the company’s balance sheet won’t help us time.

So what we do? One might say, let’s look at technicals. There is a head and shoulder structure and prices are below moving average etc. Pattern watching might help, but head and shoulders is a poor pattern more prone to failure than success (read ‘I saw it first illusion’) 

Can we make the analysis more holistic and objective?

1) Jiseki is an objective indicator that is designed to move up as performance is positive and vice versa. Hindalco is still suggesting a negative quarterly (grey cycle) and it might be too early to get positive on the stock.

2) From an intermarket perspective, it’s just an illusion that Hindalco has fallen more than all of it’s sector peers. Sector peers are not just other Aluminum and metal stocks, they are also Aluminum commodity (DOW Aluminum) indices and ETFs (ALMN.L). Compared to many sector peers since 2009, Hindalco is still among the top performers. (not as much as TICSO, SAIL and HZNC , which are running shorts). So all that talk about Aluminum international prices are subdued and effecting Hindalco is not true. Aluminum spot prices are one of the worst in the metals sector, while Hindalco is far from worst. So we won’t be surprise if we actually see Aluminum prices rising before Hindalco.

3) “Ok! We get it” but show us the signals. The Jiseki cycle crossover signal is still in a sell and technically the stock has shown a poor retracement of the previous high. The structure looks weak and far from an accumulate or buy. The current report has run three pairs for you on a) Long DOW Aluminum and Short Hindalco, b) Long ALUM ETF and short Hindalco and c) Long BSE500 and Short Hindalco. The results are for you to see and judge, how Jiseki performed in these asset selections and whether Hindalco has really turned up for good or you should rather wait for a real reversal. Enjoy the latest ALPHA.

To read the latest report download it from our Reuters Store or mail us for subscription details.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 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. 100 is top relative performance and 1 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. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage India: CNX100 traded stocks and Indian Indices.

Michesan Anna-Maria, 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.


Dow @ 20,000

Proportion is mathematical. This is why Elliott beautifully illustrates the proportional structure on markets. In this update we question some Elliott assumptions and highlight some observations on Dow Jones Industrial and the overall market structure.

Fig. 1: This is a classic five wave structure from 1789 to 1990. The 1990 highs seemed like a top, but markets continued to extend more than a decade after the respective high well into 2000.

Fig. 2: Elliott Wave structures give 2000 top a high importance. This importance rests on the super cycle fourth wave low at 1982. If that low is assumed to be in 1975 and not in 1982, the count would change. This would suggest that the all time top is still not in place and markets could extend higher above 2000 all time highs.

Fig. 3: This is the five wave structure from 1932 lows.

Fig. 4: This is the five wave structure from 1975 lows. As one can see the time taken by the second wave is marginally smaller than the time taken by the IV cycle wave (3300 days). The difference appears large on a visual chart with an arithmetic scale, but on a log scale both price and time suggests that the Dec 1974 and Aug 1982 price structure (1 and 2 cycle wave) can be compared with the Jan 2000 and March 2009 structure (III and IV cycle wave).

Fig. 5:  All the above cases suggest that if we extend the channel high of the supercycle count (Fig. 3) the DOW structure can see an extension till 20,000. Terminal waves are very tricky and this is not any terminal wave. This is a terminal wave of all available history of markets. Two decades of error in a history of pattern watching and Elliot counting from Dark Ages in 1330 should be acceptable.

Till 12,000 and 11,000 supports  stand firm on DOW, this preferred stands firm for us.

 

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


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