Archive for the ‘Soft Pairs’ category

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

Orpheus Research at Reuters - United States


The cross asset myth

Trading Long Zinc, Short Coffee or say Long Industrial Metals index and Short Carbon Emissions index could evoke a shock among the pair trading community, leave aside the simple investor. How can you mix coffee with zinc? “These are pairs, they are not for me, I am a single stock (asset) absolute performance go getter”. Wrong Answer. A simple Dow trade is an investment in the Long Dow - Short Dollar pair as Dow is denominated in dollar. It’s different that you ignore the dollar leg and just look at the Dow leg. But the real returns on your single asset trade have to be netted for dollar performance.

From July 2008 we have been tracking assets against their respective benchmarks in form of pairs. We benchmarked metals against precious metals index, various currencies against dollar, agro assets against a composite agricultural index, and energy assets vs. energy index. We illustrated numeric rankings selling the best and buying the worst, it worked.

We started running a portfolio of agro pairs, forex pairs, metal pairs, energy pairs, and bond pairs all the time realizing that we were actually trading a cross asset portfolio where metals were pegged against agro, agro against energy. It was a mix match of different assets. If we had two running pairs long AIGI (Industrial Metals) vs. short Nickel in one trade and long AIGE (Energy Index) and short heating oil (heat) on the other, we were actually playing Nickel against Energy Index.

Today we integrate our Alpha Global portfolio with the following 55 assets. 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).

Now you will see us doing seemingly exotic strategies where we unwind AIGI-Nickel pair at a profit by just closing the Nickel leg and shifting AIGI exposure against short Carbon. It just sounds strange. Markets and assets are connected in time through performance. Time does not differentiate between zinc and coffee. It’s the same inefficient divergent pairs that can be profited from. Lack of cross asset pair tradability is a myth. Get ready for long zinc, short coffee pair. We are expecting a signal on the pair soon.

To read the latest Alpha Global report download it 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]

Numeric Ranking Assets

Performance Cycles - Aggregate Assets

Numeric Ranking

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: Agro, Forex, Metals, Energy

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


Markets and Terror

What happened was sad. But unfortunately such actions of terror are created by the society itself. Though extreme, terror is human expression of revolt. Terror is a mass psychology event as it influences masses, creating panic and despair in them. One of our members mentioned that he was sorry about the state of the world. Though painful, social mood is not just expressed in markets, it’s also expressed through politics, war, terror and in many other forms.

Terror could be explained from a social mood perspective (negative mood) and from cycles. International battles, wars and terror activities are cyclical too. And social mood has a strong bearing on economic cycles, rather they drive them. Extreme terror actions and war’s historically suggest extreme social mood and reversals rather than otherwise. We see more wars and terrors at market bottoms than near tops.

Though the large cycle on terror unfortunately continues to point up, the current terror action in INDIA, comes at a time when we are looking at equity market intermediate bottoms. How this shameful event translates in market tomorrow remains to be seen. But any bounces on market (if any) will not be a classical Mumbai resilience, but extreme social negativity which coincided with a broad market low.

GOLD a crisis commodity will also be effected by the large cycle of terror or negative social mood. But the current upside on GOLD SPOT India has weak links with the onging activity. We compare two Gold assets from different regions, viz. GOLD spot India against GOLD international. As the local financial crisis gets mixed with a large scale terror violence in the city. But GOLD India spot has been outperforming GOLD international spot since MAY 2008 and seems to be heading into a cycle performance high against it’s international peer.

This suggests that local GOLD performance maybe a weak proxy for start of a sustained uptrend on international GOLD prices. The signal might be premature. The performance cycle between local and international prices (illustrated) of Gold suggest that INDIA GOLD may find some tough resistance ahead at INR 13,362 prices. Till prices break the respective level, we will continue looking at the current bounce back as a counter trend bounce on Gold INDIA spot. Regarding international GOLD spot, prices moved up as anticipated to our projected targets near 800 levels and higher. The bounce back seems incomplete and could see XAU pushing higher till 850 levels.

Silver on the other hand held above our anticipated supports and a support at RSI 40, NON CONFIRMATION and extreme oversold momentum, all suggest that our SILVER positive case continues to hold firm. SILVER INDIA spot also has hit a key primary channel support and has made a weekly KEY REVERSAL bar. XAG push up above dollar 10.5-11 would give us further positive price confirmation. Platinum, ZINC and Steel prices last week action was also as anticipated.

On the large time frame, if GOLD dollar 3000 still seems a distant projection, look at what a handful of boat terrorists can do to a city. A multifold projection of this event and you will understand the respective projections on International GOLD. The price of the crisis asset is linked with an impending large degree social crisis that may manifest in an alternate form or as a war. This will bring back to life the famous words of Edward R Dewey, “Till humans live, they will speculate and war”.

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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.

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ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA