Archive for the ‘2012 and Beyond’ category

The Rupee Scare

rupee scare

There is only one problem here, psychology is prone to reversal, after greed comes fear, and then the cycle repeats.

Scare is an emotional need

Like we need soap operas, we need things to be scared of. Emotions are why we live, so if we don’t have greed and fear, we might not feel alive. This is true with markets. How we interpret indicators (a currency) could also be linked with how psychological we want them to be. Robert Prechter would agree since he believes that social mood drives markets. This should mean even macroeconomic indicators or currency value could be driven by social mood. And, if a 60 rupee-dollar value does not scare us enough markets weakness could continue and vice versa. There is only one problem here: psychology is prone to reversal, after greed comes fear, and then the cycle repeats. So, if you think the rupee has scared us enough, the reversal is round the corner. It might all sound too simple. Actually, markets are very simple. “Simplicity is the most undermined investment technique,” said Garfield Drew.

Indicator as a system

Coming back to the currency. A currency is supposed to be a macroeconomic indicator, which is a true reflection of the economy. How good is this true measurement? We have been taught as technicians that a currency has an inter-market relationship with the local equity benchmark. The currency strengthens the equity benchmark moves higher and vice versa. Ok! It works up to a certain extent. You can see that visually. But are visuals enough? We have doubts about visuals being enough for risk management.

Refining the indicator…

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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.


Retaining Nifty target of 8,000 for this year

The amplitude is the measurement of change between two extreme values. To measure the size of change in Nifty ( Sensex) over 2013 is an amplitude exercise. Could Nifty deliver a stellar performance this year? It is tough to measure outliers. To understand how high a rocket can go or how large a fire blast it makes in the sky is rocket science.

For us earthquakes and stock markets express a similar character, as they both are a part of the natural phenomenon. Moreover, sticking out your neck for an annual Sensex forecast is not tricky. A good one can get you 15 minutes of fame or vice versa infame. Why 15 minutes? Because market participants are short sighted and more interested in the January effect rather than the decade effect. And this myopic approach cannot be sorted out because humans suffer from hyperbolic discounting. We are more concerned about today than tomorrow.

So, even if we had clocks telling us about market timing, what’s happening tomorrow or a few months ahead would be more exciting than what is happening from 2011 till 2019. But, timing still does not solve the problem. Determining the quality (amplitude) of correction or growth would remain a problem. We have mentioned Benner cycle clock on prior occasions.

Benner was one of the many reasons we reinforced our positive forecast for 2011. One reason why Benner got it right was because his dataset was built around an annual average of high and low prices. Symmetry is another reason why his clock still works.

Geometry, symmetry and proportion can give insights into amplitude. DowElliottand many other technicians have compared bull and bear market sizes (proportion), to forecast the large trend ahead. If you look at the Dow 30 geometry, the 1929 high was unwound in 1945 (after 15 years). While the 1987 high was unwound in 1994 (after six years). Now after moving sideways for 10 years (2000-2012) any new Dow 30 trend could be at least a third of the size.

To read the complete article visit Business Standard

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.


Jazz & Trading

Christmas is about making wishes. However some wishes are unreasonable. For example wishing for a universal database is wishful thinking. As this database would need a lot of server space. I am not speaking of a smart stock market database but a database for every organic data from stock markets to stars. Scientists know limitiations connected with cosmic data. The data astronomers are capturing, on occasion, comes from the past, from a few millions years back in time.

In continuation with our last article on turbulence, predictive science is about a few aspects, stolid databases, smart query systems and artificial intelligence, which can anticipate patterns in data or trends in data. Now artificial intelligence regarding database systems might seem science fiction and universal databases might be wishful thinking. This leaves us with just smart query systems built as funnels under a deluge of information.

Google is like this prototypical funnel under a deluge of information.  It has its limitations. I was looking for an American Jazz singer I heard a few years back and I just can’t find her with all the current search tools.  The search is not cognitive or semantic yet. Google could not help me reach the singer because I needed related search parameters. What was her age? Whether she was African American? What was her net worth? Suddenly something so relevant for me got lost in the deluge of information. The problem with search is lack of smart catalogued databases, which could understand each other. Only when databasex could understand each other could data come alive and make search smarter.

Why should databases understand each other?

To read the complete article visit Business Standard

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.


Navigating in another lost decade?

I was in Budapest for a market conference. The theme was based on Martin Pring’s recent book, ‘Investing in another lost decade’. Pring is the second generation of technicians along with John Murphy and Robert Prechter. Pring’s generation followed the generation of J. Welles Wilder, Joseph E. Granville and Ralph N Elliott.

An evening prior to the meeting, I told Martin that I went through his slides and the price structure seem to suggest that the answer to the lost decade was negative rather than affirmative. He said “I got it all wrong”. He had made an affirmative case. He believed we were headed for a lost decade.

Of course I was biased, opinionated, and seeking a confirmation of my analytical case of DOW 20,000 in Martin’s work, which was totally bearish. The visuals were the same but my interpretation contrasted his. The next day when Martin presented the case; I holding true to my opinion (hard to abandon them) reasoned again with some observations and queries after his talk.

This is what he said. ..

You can read the complete article in Business Standard

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.


Garam Masala Mix

Even after a thousand or more years of trade, Indian garam masala remains exotic and out of reach for parts of Central and Eastern Europe. What comes from India still has its allure and aroma and it becomes more valuable if its hand delivered. Hence, I had an additional bag full of chai and garam masala and some silk fabrics on my back from Delhi to Budapest. I felt more like a modern silk route trader than an economist.

The strong essence of coriander with red pepper steeped out of the multi layered plastic bags making things more tricky, worrying me about the fellow passenger and what if he requested a change of seat. Fortunately nothing like that happened. Rather the German tourist guided me about the journey ahead navigating on his IPhone and turned out to be an India curry lover. It just dawned on me that we were in the new age of consumption. Consumption connected with novelty, whether it was taste, technology, and look or simply something just branded “new”.

The new consumption is more small ticket consumption or should “feel” like small ticket consumption. You don’t pay for the IPhone upfront but as a part of a small fee over years from the provider. This new consumption was also linked to something instant, like food or clothes or social network consumption, where we consume internet band width for instant pleasure of sharing or connecting with friends. This consumption trend drives businesses valuing together more than a trillion dollar. Apple is a technology company with products which seem like small ticket consumption.

You can read the complete article in Business Standard

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.


The Hidden Dragon

While our counterparties have been busy defending their negative sentiments, markets have crept higher. Now our fellow bears would say that, “So what if we have crept higher, there is supply overhang that is still there. A multi-week break of resistance does not mean that the multi-month resistance has vanished. Look at the Dow, even if the multi-month stands broken, the all-time 2008 high is still standing firm”.

See this is all fine, and bulls make money because bears reason, question, doubt, etc. and vice versa. But what the losing party forgets is that it’s extremely hard to pinpoint the last leg. A panic low does not come and say, “I am done, please BUY”.

You can read the complete article in Business Standard

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.


The new business model

My friend Babar invited me to a Jammu conference. We were sharing our stories. My story was on ‘Time’, his was ‘soft power’. Babar had done a lot of work in the region and was recognized and rewarded for his efforts in the region by various state groups. It was during our interaction that we not only realized how overlapping our work was but also that the society needed a new business model.

What was the overlap? Divergence was a reality for both business and society. It ran from stars to stock markets from aspirations to failures from country to a state. Divergence was a fluctuation that existed in patterns, in data, in thought. And this seemingly random fluctuation was connected to another random fluctuation. Now one may say that everything is connected, however few can demonstrate this connect.

Complexity was intrinsically simple and hierarchical (Herbert Simon). Complex systems had a similar character. This is why a capital market business had a similar complex pattern like one involved in running a cooperative in Kashmir or simply running J&K.

Human initiative was about understanding and channelizing this divergence. It was about anticipating and measuring volatility that comes with this divergence. But how aware were the players (business, state and community) of the big picture divergence. In our paper on SSRN, we illustrated how divergence was repetitive and how divergence was not specific to market prices but also any organic data set. How something as generic as growth and decay in search data from Google (Researching Google Search) had a predictable seasonality associated with it.

So is this stone age of business?

You can read the complete article in Business Standard

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.


The Argumentative Indian

 

I just arrived 3 days back to Delhi. It started well with the Airport shuttle to the centre of the city. But then the dry and hot Delhi is prompt, “welcome to the extreme climate city”. Distance keeps my love alive for India.

Talking about love, listening or reading news about India from Europe is different than coming here and tuning in. I have never felt such an anti-state wave before. There was hardly an objective comment about the state. The state is bad, the leaders are corrupt, the laws are poor and “India kabhi change nahin ho sakta”.

Then there are open forum debates, be it between Air India vs. its pilots, the state vs. telecom majors, finance minister vs. Mauritius, the debate about productive investment in gold or about Kingfisher or Reliance. The regulators recommendations are criticised and labelled as arbitrary, regressive and inconsistent. Thought leaders have started using words like destroyed and collapse. There are of course counter opinions, “seven reasons why India will not collapse”. It seems like an ever ending debate fitting the description Amartya Sen gave us as ‘argumentative Indians’

I don’t have a pro state stand neither I am against the state. Maybe I am judging the state relatively and not absolutely. For me messing up a pensioner’s life, losing his pension in risky investments is a bigger sin than trying to restrain a kind of laissez-faire. We are in tough fiscal times and controls has helped India on prior occasions, but maybe it’s poor timing and lack of diplomacy (India has lesser diplomats than New Zealand). And after a secular fall from Nov 2010 the negative market sentiment only fuels up the debate further.

As an investor, trade or money manager I have a choice whether I want to indulge in the blame game or think of a solution for risk management. What if these negative sentiments exacerbate and take us 20% lower from here. What then? Nifty is already down 20% since Nov 2010 another 20% may lead to further pain. Owing to geographical bias or portfolio allocation rules, going cash or cutting out losses is simply not an option. Is there a way of superior stock selection? Is there a way to identify 10% of the market which can outperform and sustain despite any broad market drop and continued negativity.

This article was written for Business Standard

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.

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.


The Weeping Willow

I was invited to give an inspiration talk at the Startup Weekend for the global Jade network. KJ, a friend of mine, an international expert on e gaming and netpreneur could not avoid a smirk, “Mukul and inspirational talk”. He knew me well and was much updated about the contrarian me and our idea of glorifying the worst. Unmindful of KJ’s de-motivation, I went ahead and delivered the following talk.

It was sometime in June 2005, I was with my partner in an art museum looking at the picture of a Salcia tree. Salcia’s are a predominant species here in Cluj. She told me about the Greek tragedy (Death of Eurydice) linked with Salcia, popularly known as ‘The weeping willow’. We were looking for a name for our company and after hearing the tragedy I started toying with the idea ‘The Weeping Willow Inc.’ I foresaw an economic tragedy and saw a perfect fit. But then we are in the age of euphemisms, hard truths can be bad for business. This is how we chose ‘Orpheus’ as a name for our company.

Now 7 years later, sorrow seems to have transcended from the painting on the wall to austerity and debt worries driving Greek pensioners to suicide. We are living tragic times where more than 40% of Spanish youth from 15-24 are jobless. One might say India is another world. It’s an illusion. Almost half a billion India is young. You should read the recent TIME story on ‘Children of the New India’. Disappointments rarely make headlines, till it creates Mohammed Bouazizi or the Tibetan youth immolating himself in Delhi, protesting Chinese interference in Tibet.

This could also seem disconnected to the economic reality. But it’s not. Economics 101…

This article was written for Business Standard

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.


Technically Speaking

Mukul’s article was published in the latest Technically Speaking.