Archive for the ‘Cross Pairs’ category

Long AIGE, short coffee to begin

The performance cycles point to energy outperformance vs. coffee underperformance. Long ETF Energy vs. Short Coffee should begin. AIGE.L is an ETF based on Energy, with Crude Oil (43%) weight, Natgas (35%) weight and 11% each for heating oil and unleaded gasoline. The cases of historical divergence between coffee and AIGE is illustrated.

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.

Coverage: Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y,  US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).

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.

To login to the member’s area or access Orpheus estore click here.


Vivek Marne is currently working with BDO Consulting in Oman, providing services in determining new business opportunities for various clients to understand markets and companies and identifying ways in which clients can become high-performance businesses. He has worked previously with KPMG (global risk and compliance services of manufacturing companies in India) and with Irevna – Division of CRISIL (fundamental analysis of Information technology companies). Vivek is passionate about Technical Analysis, a self taught Elliott Wave Technician. He conducts technical analyis on a variety of financial instruments on his blog vivekoutlook.blogspot.com. He covers commodities for Orpheus Research.

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Long zinc, short coffee delivers 9% (7 days)

Despite starting counterparty odds, long zinc -  short coffee was up 9% and long AIGI (industrial metals) - short gold was up 14%. This week we are doing another pair rollover. We are closing the short heating oil leg and plugging the long AIGE (Energy Index) leg with Natural Gas. The Natgas Rieki is turning against dollar and also against Brent and AIGE. Our global asset rankings are benchmarked to dollar, so as natural gas moves up to top three, we don’t want to hold it as a naked asset anymore.

Alpha Pair Tracker


The other running pairs like short carbon emissions ETF and Crude, Short Carbon Emission and AIGI (industrial metals) delivered 1.6% and 8% since 15 July respectively. Long Euro – Short dollar is up 16% and still running. GBP USD and JPY gave first signals of exhaustion against dollar.

During an internal brainstorming session, the question which emerged was “Why should be just look at extreme divergence to short the best and long the worst?” and “Why can’t we say keeps the low divergence pair running, say between wheat and grains (No. 4 and 10)?”

The whole idea of playing extreme divergence is about accepting that one can try understanding that assets have diverged more than normal and the path of least resistance is to low or neutral divergence when for example coffee and zinc reduce the gap from worst and best to somewhere mid way. Working with low divergence pairs or non extreme pairs is like guessing how a backwardation will resolve, very tough.

On a final note, our top ranking coffee was number 2 this week. Sugar assumed the top ranking spot. What a better time to talk about sugar but now. Sugar was in the news and the majority is made to believe that there is no asset better than sugar today. For us at Orpheus, Sugar should not only underperform dollar, but also more than a few global assets over the next few weeks. The latest Alpha carries the pair tracker with updated signals and global asset rankings.

Numeric Ranking

Strategy Update

Sector Cycles

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.

Coverage: Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y,  US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).

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.

To login to the member’s area or access Orpheus estore click here.

Orpheus Research at Reuters - United Kingdom

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The Hunt brothers – II

The historical case of silver Thursday suggests cornering of assets is a cyclical event with probable consequences.

Cornering markets may have come off age, but even today traders dare to take large bets. How safe is it? What do historical cases suggest? Are there any signatures linked with such trades? What does numeric ranking of global portfolio suggest? Time does not differentiate between assets. If coffee is the best in a quarter compared to 54 global assets and Zinc is the worst, it’s easy to make a cross asset case, where we go long Zinc and short Coffee. We initiate the pair today.

To read more about…

Anthony Ward’s 658 million pound cocoa trade and how softs are under extreme buy pressure?
How Hunt brothers cornered the silver market?
How cornering is more about tops than bottoms?
Why there are few attempts to corner gold?
What’s the update on our gold undeperformance case?
What about crude and brent performance cycles?

Read the complete article at Alrroya

..download the latest Alpha Global report from the links below.

The latest Alpha Global carries pair tracker signals, numeric ranking, numeric ranking changes, performance cycles. For more information on Alpha Global mail us at [email protected]

Performance Cycles - Aggregate Assets

Numeric Ranking Sectors

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.

Coverage: Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y,  US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).

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.

To login to the member’s area or access Orpheus estore click here.

Orpheus Research at Reuters - United Kingdom

Orpheus Research at Reuters - United States


ALPHA.GLOBAL - BOEING VS. OIL

The first pair we tested on performance cycles were BOEING vs. OIL in July 2008. Oil was heading into new highs every day and Boeing was underperforming. Time fractals suggested that it was time for the performance cycle to turn in favor of the Industrial major. What happened was historical. The performance cycle we were tracking had a nine month periodicity. Oil crashed from 145 levels to 35 and despite all the negativity on equity Boeing outperformed. The pair made above 30% for the period.

We have come a long way since then. We have managed to reduce holding periods and made the pairs more tradable. We are using many filtering techniques to identify pairs, similar sector, beta sensitivities and pairing stocks against DOW. The latest ALPHA GLOBAL introduces 10 Global pairs, four against DOW Industrials, one pair from Industrial sector (United Tech, Boeing), one from staples (Macdonald’s and Coca Cola), a few cross sector (Boeing and Exxon) and a few cross asset (Dow vs. Oil and Dow vs. Gold). The top running pairs are Boeing vs. Exxon, Dow vs. Exxon, Coca Cola vs. Macdonald’s at 24%, 19% and 6% respectively. We are the only research company in the world to claim that Dow vs. Oil or Dow vs. Gold move in performance cycles at all time frames. Understanding such cyclicality can not only give tradable opportunities but also help in asset selection. To know more on Alpha, performance cycles or time triads write to us or visit econohistory.com, timetriads.com  for primers and other research articles.

To login to the member’s area or access Orpheus estore click here.

ALPHA is a pair trading, long only and short only strategy 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.

LONG ONLY, SHORT ONLY portfolio covers DOW, S&P500, SENSEX (INDIA), GOLD, SILVER, EURO DOLLAR, YEN DOLLAR, 10 YEAR US TREASURY BONDS, 10 YEAR GERMAN BUND.

STOP LOSS AND EXITS are activated at 2%

Please feel free to mail us for any clarifications. *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.

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


ELLIOTT VS TIME

Challenging a seventy year old market forecasting theory isn’t easy. It is tougher if one is a practitioner himself and a believer in the Elliott wave theory of price fractals. However, when we talk about TIME FRACTALS, PRICE FRACTALS have a strong challenger, even if the theory of TIME is at a nascent stage.

We should admit that it was a pleasant surprise after nearly 10 years of digging price patterns to reach TIME FRACTALS. The latter part of the year will be devoted to explaining ELLIOTT FRACTALS through TIME. The two rules of Elliott i.e. 3 wave is never the shortest and 2 wave does not get into 1 are rules of TIME also seen in Elliott waves. Currently EWT is the closest theory to TIME.

Illustrated below is a small example of a performance cycle between BSE500 (Indian 500 stock composite) and BSE30 (Indian 30 blue chip composite). Performance cycles are the direct proof of cyclicality in time or fractal nature of time. If we can prove that an asset A outperforms and underperforms asset B in a cyclical nature, we are simply proving that a ratio line which has no units of price associated with is has an order associated with it. Why anybody did not see it yet and we are the only one talking about it, because the idea is too simple to be accepted or believed. As we say the idea of time driving markets and nature is ahead of its time.

INDIAN PAIRS

So what is with BSE500 and BSE30? Can you really make money on SHORT BSE500, LONG BSE30? On a primary basis, markets have witnessed about 10 performance tops on BSE500 against BSESN since 2000. Barring one signal, rest all of them came at or near historical tops viz. Mar 2002, Jan 2004, and Jan 2008. Where are we on BSE500 vs. SENSEX now? The performance cycle between BSE500 and SENSEX (BSE30) just like its global peer is at an extreme. This might look coincidence, but even if there is a relative performance cycle between DOW and SENSEX, global equities move together. The broad market indices weakening against blue chip indices don’t excite us. They tell us that the best part of the 2009 bull reprieve is over and whatever reason we may give us, the odds are against us as equity owners. India is a great story. It will be always a great story. But if the broad market depicted by BSE500 decides to falter against top 30 stocks, markets are heading for atleast a month or two of exhaustion. The post Jun low which could push markets higher seems a bit distant at this stage.

There are some extreme variations in results starting 5% to 60% annualized. But the interesting part is that the strategy delivered positive results most of the time. 20% average spot annualized gains are not easy to ignore whether you are fund manager or a trader. Leverage on derivatives makes this simple strategy look too good to be true. We will see how the strategy works out now.

AMERICAN EQUITY PAIRS

Performance cycles can shed some light on where Sensex and global equities are headed. A global pair relationship between S&P500 and DOW 30 illustrates the relationship between broad 500 stocks and 30 blue chips. We write about the two indices and the performance cyclicality between them. The pair hit a CYCLE low, both on an intermediate and primary basis on 23 Nov 2008. This suggested that the broad 500 blue chips could not underperform the top 30 American blue chips any more. Why? Because performance cycles are based on time fractals, there is an order in which broad market performs or underperforms the blue chips. Market turnarounds have a lot to do with the respective dynamics.

When broad markets fall against blue chip, rises become shallow and unsustainable. Another interesting aspect to be observed here is that it’s only now after Nov that the broad market has turned lower against DOW. This removes any doubt for us that the intermediate path of least resistance remains lower not higher for American equities. READ MORE….

CROSS PAIRS

Then there are cross pairs. The anticipated turn on OIL we talked about happened. Prices fell nearly 23% from Jun highs. READ MORE…

METAL PAIRS

In conclusion, pair performance demonstrates the mathematical nature of time and how markets move from disequilibrium to equilibrium oscillating in an ordered fashion. We can keep trying to avoid time, ignore it, but it will continue to manifest in various forms, various global pairs creating risk and return in a fractalled way telling us that SHORTING S&P500 and going LONG DOW may not be such a bad idea after all. READ MORE…

*This is a perspective product and not 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 ECONOHISTORY research products.


THE DOLLAR SENSEX

There are stories about the inverse correlation between SENSEX and the US Dollar Index (USD). The same stories which talk about inverse correlation can also explain perfect correlation, but there is something missing here. First, perfect correlation does not last. Second, if instead of absolute prices if we compare changes between prices, the idea of correlation adorns a new meaning. For us at Orpheus it is not about positive or negative correlation, it is about the cycle of correlation.

The question of when DOLLAR strengthening against SENSEX will start or vice versa is more important than the obvious fact that dollar strengthening affects Sensex inversely. SENSEX pushed 17% higher in dollar terms compared to INR. This was a result of INR weakness against the dollar that was reflected in SENSEX returns.

According to performance cycles, an asset will always outperform or underperform the other asset. This means that there will always be an inverse correlation between any pair of assets if you are comparing performances. So what matters is really not correlation, but which of the assets is outperforming the other and WHEN.

In continuation of the above view we continue to look lower on SENSEX. The current downmove looks like an impulse which should push prices back till open gap levels.

We highlighted a Head and Shoulders pattern on SENSEX and Double Top pattern on NIFTY and BSE OIL. The current report also carries ANTICIPATED AND HAPPENED cases on NIFTY, CNXIT and BSE REALTY, as well as time oscillators updates. Our overall Indian market view remains negative.

Enjoy the latest WAVES.INDIA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

ORPHEUS INDIA RESEARCH WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

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LONG DOW, SHORT OIL

Long DOW, Short OIL might seem like a counterintuitive pair after we have already recommended LONG Gold, Short DOW, but the reality is different. Gold and OIL though belong to the same commodity asset class can behave differently. Gold is a crisis commodity and the weekly cycle lows against DOW (SLIDE 1) suggest that even if there is a primary bull reprieve coming on DOW, GOLD may not underperform DOW.

Unlike Gold, OIL has pushed up very fast against DOW. This could be owing to oversold levels, reprieve in recession worries, or simply putting volatility cycles currently ruling OIL. There could be a thousand more reasons to explain why OIL shot up against both Gold and DOW. What really matters is where is the performance cycle between OIL and DOW headed now. We have been in a non accepting mode on OIL since 13 APR, calling the current rally as an UP BUT TOPPING corrective mode. We did not see prices moving above 55, but then market surprised and has moved above to 70. This could be a C/3 leg up, any further move up from here dashes all our exhaustion expectations. However, OIL vs. DOW performance cycle has non confirmed and is suggesting a weakness on OIL compared to DOW. This means that the OIL intermediate topping could be near, as we are not expecting DOW to push up above 8,800-9,000 levels in this leg. If this was not enough, OIL is also topping against Gold. OIL needs magic to sustain and push to further highs now that performance cycles have turned against it and in favor of GOLD and DOW.

Performance cycles are easy to understand, but they become tougher to grasp when you start to explain them fundamentally. The real counterintuitive thinking was not how we can have Long Gold and Short Oil or Long DOW and Short OIL at the same time, but how can we expect a multi month correction on Gold (The Gold collapse) and still expect Gold to outperform DOW. The current report carries updates on CVX,XOM, NATGAS, MCX ENERGY Index, BRT and WTM.

Enjoy the latest WAVES.OIL

ORPHEUS GLOBAL RESEARCH

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators.

REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


Long Gold, Short Dow

For us at Orpheus, HISTORY is mathematical, this is why ECONOHISTORY for us is a quantifiable study of pair performance. Pairs can be between Nikkei- BVSP, Dow Industrial - Dow Transports, Gold-OIL or between any two economic time series.

Performance cyclicality was highlighted first time in a recent research paper published at the Kyoto University journal called the ‘The BRICS model from a Japanese perspective’, Nistor, Pal. The paper illustrated performance cycles between Nikkei and the other BRIC countries.

Performance cycles work because assets in a pair underperform and outperform with a cyclical periodicity. The illustrated pair Gold-DOW has seen GOLD underperforming DOW Industrials since MAR 2009 (Fig.1). The larger performance cycle also seems to be turning up in a favor of Gold. This could mean that either DOW should underperform and fall against Gold, Gold should rise or outperform DOW or Gold should fall but less compared to Dow.

The consistent retest of 900 is encouraging for GOLD bulls and with our UP BUT TOPPING view on global equity including DOW, we will not be surprised if GOLD spikes higher next week. The overall view on GOLD still remains in a counter trend up, but above 900 we can’t remain negative on GOLD. There are some over reactive momentum signals also on the intermediate time frame (SLIDE 3).

This is what we said in our WAVES.GOLD report on 10 APR. The GOLD Q2 high.

“Our ‘UP BUT TOPPING’ view witnessed GOLD fall from near 980 levels to the current 870 levels. Orpheus time oscillators consider the Q2 top of GOLD to be in. Any push up now should restrict near 900 levels.”

Now that Gold has pushed up above 900 and GOLD-DOW performance cycles are pointing higher. We would like to see a clear turn back below 900 to be negative. The overall industrial metals case seems to be topping, another reason for us to believe short equity, long Gold pair might be at least worth a perspective watch the week ahead.

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Enjoy the latest WAVES.GOLD

WAVES.GOLD is a perspective product published on Monday and Wednesday. The report highlights GOLD and other precious and base metals. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

REUTERS RICS: XAU=, XAG=, XPT=, CU-NYC, .SPGSIZ, SPGSIA, .NSTL

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM


ORPHEUS RESEARCH AT REUTERS - USA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.


The BRIC Model From A Japanese Perspective.

Ioan Alin Nistor, Mukul Pal


Assistant Professor, Faculty of Business, “Babes-Bolyai” University, Romania, e-mail: [email protected] (神戸大学の日本学術振興会 外国人特別研究員)

Head of Research, Orpheus CAPITALS, The Global Alternative Research Company, e-mail: [email protected]

Starting with the fundamental idea of an “emerging market economy”, it’s role, utility and dynamics in the current global set up as a balancing economic block, the paper analysis Goldman Sach’s emerging BRIC’s countries model in context of the pre and post 2008 financial crisis. The paper looks at micro and macroeconomic valuations, currency and the economic cycles to illustrate changes in the four economies. Using Japan as a developed economy, the paper also makes a comparative approach and tries to forecast the economic development of the block and respective relation among these countries.

Key words: emerging markets, BRIC’s countries, economic cycles

Overview

Emerging market is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon that is not fully described by or constrained to geography or economic strength; such countries are considered to be in a transitional phase between developing and developed status.

The “emerging market” concept is not very clearly defined. Although the concept of emerging seems to be widely used, it has different implications in defining which country is emerging. Kolodko (Globalization and Catching-up in Emerging Market Economies, 2003) believes that it is easier to determine which countries are not emerging market economies then it is to determine those that are.

Determining the emerging market status of an economy is a matter of establishing the openness and development of its institutions, as well as whether the economy in question adheres to the rules, laws and culture of an open-market economy. (D.K.Das. Financial Globalization and Emerging Market Economies, 2004).

The term “emerging” is widely used to describe these economies. Maybe more than any language, in Japanese language, the term “emerging” somehow defines very well the type of economy that it refers to. By using the kanji 新興which symbolized “new” and “rising”, it makes it a bit easier to picture these economies.

The International Finance Corporation (IFC), member of the World Bank Group, began using the phrase “emerging financial markets” in 1981, when they kept and published standardized stock index for a set of countries. The original list contained nine countries whose stock markets looked promising. The list was later expanded.

International Monetary Fund (IMF), in the World Economic Outlook from April 2008, explains a country classification of the WEO Groups (World Economic Outlook). WEO divides the world into two major groups: advanced economies and emerging and developing economies. More than 200 countries are included in the “emerging and developing economies” category, separated by regions.

International financial institutions or research institutes, group the emerging countries in different categories. The IIF (Institute of International Finance) divides them in four groups: Emerging Asia, Latin America, Emerging Europe and Africa/Middle East with a total of 23 countries. “The Economist” has classified 25 emerging market economies for reporting its emerging market indicators.

The BRIC Model. Review and Forecasts

A Goldman Sachs Report from October 2003 (Purushothaman & Wilson 2003, Dreaming with BRICs: The Path to 2050) projected the GDP growth, income per capita and currency movements in the BRICs economies until 2050. Using the demographic projections and a model of capital accumulation and productivity growth, the paper argues that if things go right (a series of assumptions were taken), “the BRICs economies together could be larger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6”. However, as the report suggests, there is no guarantee that the economic growth of these countries will reach what is forecasted by the study. The growth depends on a set of factors, such as macro stability (price stability), efficient institutions (legal system, functioning markets, health and education systems, financial institutions), openness to trade and FDI, and improvement in education level of the population.

Although the forecast is exposed to criticism (limited natural resources, unsustained growth or political instability) there is no doubt that due to their GDP dimension, geographic and population size, in spite of the problems that these countries face nowadays, we cannot overlook the importance and potential of these economies.

In the following analysis the authors make a comparative approach of the BRIC block with Japan, using the Stock Exchange Index of each country as a base for comparison and forecast. The indices used are:

- Japan: The Nikkei-225 (N225) Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange.

- Brazil: The Bovespa (BVSP) Index is a total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange

- India: The Bombay Stock Exchange Sensitive Index (BSESN - Sensex) made is a market capitalization weighted index. The selection of the index members has been made on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation.

- China: The Shenzhen Stock Exchange Component (SSEC) Stock Index is a Capitalization Weighted Index.

- Russia: The Russian Trading System Index (IRTS) is a capitalization-weighted index. The index is comprised of stocks traded on the Russian Trading System and uses free-float adjusted shares.

Challenges and Conclusions

The Goldman’ BRIC model simplified 2050 vision stands challenged. The hypothesis became weak after the commodity boom started in 2000. BRICS classification broke down as the four countries delivered polarized returns. The model was clearly divided between commodity and internal growth drivers i.e. commodity price rise for Brazil and Russia and internal demand factor for India and China.

Most of the BRIC countries made a cyclical low around 1995. Brazil made a primary low in 1995, Russian RTS made a low in 1996 but retested it again making a marginal new low in 1999, the same was true for the Shanghai Index, which hit its primary base near 1995 and finally the Indian Sensex 1995 low was marginally breached. Most of these 1995 lows were followed by multi-year slowdowns. The relative alpha for BRIC markets was clear after 2000. And the Goldman report did time that, as BRICs barring Russia grew at a multiple of three times that of Dow Jones over the 2000-2007 along with the strengthening of the local currencies. But the report missed to call it a global equity bottom in 2002, and the 2000 equity meltdown and its impact on the emerging market model. The report did provide GDP projections but it did not articulate the relative attractiveness of the BRIC countries. Though the BRIC countries were mentioned as the new global engines, the impact of rising food prices on BRICs and the demographic strength could become a liability if food price increase continued unabated also found no mention.

The report was overweight on drivers like growth and productivity. If one looks at the commodity link, Russia was a disproportionate gainer in the group not just because of the growth projections from internal macroeconomic factors but because of its high weightage (64 per cent) energy export basket. We crosschecked the returns on BRICs in dollar weighted terms, gold terms and CRB Commodity Index terms for the 2000-2007 period. In actual terms, the Russian stock market grew 3.6 times more than the other BRIC countries in 2000-2007. In gold weighted terms, the multiple was 9.4 times, and in CRB weighted terms the multiple was at 5 times. In dollar weighted terms, the multiple stood at 4.6 times. This was clear evidence that it was the underlying commodity boom and not the emerging market growth factors, which were polarizing the performance among BRIC countries.

Now that the commodity cycle has come down, one needs to look at new parameters to judge performance between the BRICs and between BRICs vs. Nikkei.

We believe that unlike the last time a rise in commodity prices now may not see a similar action with both Brazil and Russia rising together. Rising commodities are not good beyond a certain level for the underlying growth. We think a reprieve in commodities this time around will benefit Russia more than Brazil and China being the world’s manufacturer will suffer more than India till 2015. We compare the entire BRIC region with N225 and observed that owing to these underlying structural problems Nikkei should outperform both China and Brazil. India and Russia on the other hand should relatively outperform Nikkei. One on side this may look strange, but as we know that tough times bring out real outperformance. Russia owing to its large energy basket and sizeable correction from historical high levels in 2008 will also benefit owing to base effect just like it benefited in 1998 after the Rouble crisis.

To bring out this performance cyclicality we have studied pair performance between the BRICs countries and Nikkei, based on three 36-40 month time horizon in the 10 -12 year larger economic cycle (Fig.1, Fig. 2, Fig. 3, and Fig. 4). We used the first derivative (rate of change indicator) of the pair lines (ratio between the prices of the two indices, black line). We could see a performance cycle formation both on long term (10-12 years) and short term (36-40 months) in the illustrated cases (marked by red). We saw most pairs deliver positive performance (Table 1, Table 2, Table 3 and Table 4) if one was positive on one country (economic zone) and negative on the other. The findings suggest that there is 10-12 year cyclical performance which should repeat till 2015 on a larger time frame and till 2009-2011 on a shorter time frame. The performance time frames were illustrated in the respective workings (vertical red lines) using half of the previous performance cycle, 5-6 years for larger time frames and 15-20 months for smaller performance time cycles.

In conclusion the authors believe that there is an intricate balance between the world order and relative outperformance against China and Brazil will keep the Japanese growth engine sustain and grow contrary to popular belief. This should also lead to both actual and relative growth in Nikkei and even the underlying GDP growth for the Japanese economic zone.

References:

- Arsentis P., Paula L.F. – Financial Liberalization and Economic Performance in Emerging Countries, Palgrave Macmillian, New York, 2008

- Beim, D.O., Calomiris C.W. – Emerging Financial Markets, McGraw Hill International Edition, Finance Series, 2001

- Das., D.K. – Financial Globalization and the Emerging Market Economies, Routledge Studies in the Modern World Economy, 2004

- Kolodko, G.W. – Emerging Market Economies (Globalization and Development), Ashgate Publishing Limited, England 2003

- Financial data provided by Thompson Reuters

For a copy of the complete paper mailto [email protected]


Oil vs. Dow

The OIL vs. DOW ratio line depicts OIL performance compared to DOW. The ratio line in Fig.1 suggests that OIL underperformed DOW from July 2008 till Dec 2008 after which there was an OIL reprieve as OIL moved up from a low of 34.8 to the current near 50 levels.


The ratio line is at 1 now. This means that OIL matches its performance with DOW. The forecast on either DOW or OIL is linked to what this ratio line would do? Will it move up back above 1 or is it going to turn back down? Performance cycles suggest that OIL could underperform DOW for more than the next few months. Only after which we should see a secular BULL on OIL compared to DOW.

Even individually, time oscillators suggest that the best of OIL for Q2 is over (Fig.2) and OIL could be headed down till MAY. Any leg up till 55 should be final before the turn down. This means that we continue to look at a large intermediate bottoming on OIL and not otherwise. We captured MINOR traded moves on RELIANCE, ONGC, VERBUND, CVX and NATGAS. Even on BRT we captured the MINOR C wave up. But we remain unconvinced of a secular up trend on OIL now.

We have carried the various ANTICIPATED AND HAPPENED cases and the latest tracker.

Enjoy the latest WAVES.OIL

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