Archive for March 22nd, 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%.

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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.