Archive for the ‘Time Triads’ category

Waves.Oil - Chevron tops at 80

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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

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Power law paper published with Eugene Stanley

EPL - Scale dependent price fluctuations for the Indian stock market - Download Paper

Eugene Stanley on WIKI

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Buys vs Sells

Integrity Research

New York – today marks a departure from the traditional style of analysis used in our quarterly assessment of research performance. The data used in this analysis is from Investars and the interpretation of the data is Integrity’s.

Today, the question we are asking the data is whether the distribution of sell recommendation portfolios is different from the distribution of the buy recommendation portfolios of the research providers.

We created a histogram (below) which shows the number of research providers (y-axis) that generated each level of return (x-axis) over a one year period.  Theoretically, it is more difficult to select sells than it is to select buys. We note that  part of the difficulty in selecting sells in the real world relates to the costs of funding these short positions, which means that the timing of shorts is more critical than those of long positions. However, the Investars analysis does not treat sells like short positions, but tracks the portfolio of sells without regard for funding costs.

In the graph above, the buy portfolio of the research providers is much more centrally located (less variance) and has fewer outliers, while the sell portfolio is broadly disbursed, has a large number of outliers and has one fat tail close to the zero return mark. As a result, we must conclude that the buy and sell portfolio distributions are distinct from one another over the time period we have reviewed.

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Solving the Holyhedron

A holyhedron is a polyhedron with each face containing at least one polygon shaped hole. The boundaries of the holes share no point with each other or the boundary of the faces. For example, consider a solid cube with its 6 faces. Next, imagine thrusting a pentagonal rod through 1 face, all the way through the cube to the other side to produce (for example) a pentagonal tunnel, and only 2 of those 11 faces have holes punched in them. Each time we punch a hole, we are creating more faces. The immense challenge to finding a holyhedron is to make the holes such that they eventually punch through more than one face to reduce the number of faces that have no holes.

The holyhedron concept was first introduced by Princeton mathematician John h Conway in the 1990′s, who offered a prize of USD 10,000 to anyone who could find such an object. He also stipulated that this cash reward would be divided by the number of faces in such an object. In 1997, David W Wilson coined the word holyhedron to indicate a hole filled polyhedron.

Finally, in 1999, American mathematician Jade P. Vinson discovered the world’s first holyhedron specimen with a total of 78,585,627 faces. John Conway has offered a prize of $10000 divided by the number of faces, so this one should be worth approximately $20.3252.

(The Math book, Clifford A. Pickover, PhD Yale)

Domnita and me are a part of Cluj painting club. Last evening we were at the 5 year anniversary. We as capital market researchers don’t make the group as diverse as Dr. S. Istvan. 75 paintings were exhibited. The one above was painted by Istvan. When I saw it, I told him it was a holyhedron. It might look like coincidence but the mathematics we know is a lot about patterns and structures. If there is something mathematical, you will find it in nature. This is why John’s prize money was up for grabs, the moment it was announced. Why is nature mathematical? Because nature is proportional. Nature has all proportions, infinitesimally large and infinitesimally small. Time does not destroy the proportion of nature, even when nature ages, grows and decays. Then why no credit for Time in assisting nature to retain its proportion? Does it not sound intuitive that because Time is proportional, nature mirrors it and mathematics proves it. Time created nature and humans invented mathematics to study and solve the beautiful holyhedron.

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The earthquake science

Earthquake science can be used in markets because of time fractals

The earthquake science working for markets is an opinion as old as the butterfly effect and the study on Sun cycles influencing markets. Xavier Gabaix, assistant professor of economics at MIT, did not say that earthquake causes market behaviour, but that large-scale events in the stock market adhere to distinct patterns which can be witnessed in seismic activity. The MIT professor suggests that economists should borrow the earthquake math from scientists who model natural disasters, the power curve mathematics. The reason that economists are uncomfortable with power laws, says H Eugene Stanley, Boston University is that “unlike the bell curve they are not based on any assumptions about how markets or people work. They are simply curves that fit the data”. Now these ideas are going on since Vilfredo Pareto wrote about the curve first in 1909. Markets are still understanding it and accepting it, 100 years later and we still don’t believe that simple curves rule our life. Human non comprehension of such profound rules and patterns of nature is old news.

The power law

The problem now a century later is that the power law cannot predict when catastrophes happen, but they can predict how often they will occur. According to the Gutenberg-Richter law, for example, an earthquake that is twice as big will be four times as rare. Charles Francis Richter, American seismologist created the Richter magnitude scale. The power law school of thought is not working on the timing problem as they are convinced that power law is not about predicting time, it is just a recurring pattern in nature, which is an unexplainable rule.

Something can’t be understood so it is better to focus on things at hand rather than interpreting the science behind the law of nature. Power law is believed to allow policy-makers to set regulations that better shore up the financial world against extreme events. “It is like Newton’s law of gravity, we don’t understand why it works, it just does, and we use it to build things like rockets,” Stanley says. In short, the scientists have shown that stock markets have a mathematical elegance frequently found in natural systems.

The question here is about the mathematical elegance in everything against the mathematical elegance in time. How can time be inelegant, crude, unsophisticated, unrefined, untasteful, unfashionable and rough? In an interview, Stanley mentioned, “He and his colleagues analysed more than 200 million trades and found that power laws fit better and include the extreme events”. Why did we not test time periods Eugene?

Time decay in earthquakes

According to Plerou and Gopikrishnan, Econophysicists, “Probability of a disastrous economic fluctuation seems to be fairly independent of time period”. Time independence could be an illusion and an idea which could assist physicists to ignore time. In a research published in Seismological letters in February 2007, the authors Mark D Petersen, Tinaquing Cao, Kenneth Campbell and Arthur D Frankek talk about the same earthquake science but from a time dependence aspect. Seismologists are now talking about recurrent time and use elapsed time to calculate earthquake probabilities. Elapsed time is now believed to influence future earthquake events. There is an effort to understand seismic cycles and improve earthquake maps. The researchers say that time dependent models are intuitively appealing.

Though this is an idea in the right direction, it has ground to cover before the scientific community reaches time fractals. We have talked about time decay on prior occasions. This time we are illustrating the time decay in earthquakes. Haiti was in the top destructive earthquakes of all time and has been extensively studied by the US geological survey. We pulled out the minute by minute data from 23 January to 29 January and isolated the time between shocks across the region. The plotted chart was an exponential curve again, suggesting the time (number of days) between shocks was proportionally spread even when smaller time was studied. We get a similar plot when we study earthquake date from 1575 and similar time patterns are seen when we study nuclear tests or any other social and natural activity.

How can time exhibit the same exponential order when the order is believed to be everywhere else? We can either see fractals and patterns all around us, in everything, or accept that time is indeed what gives every living entity, anything which ages, this distinct pattern. Everything from earthquakes, to volcanoes, to cotton prices, to human behaviour and even to the Sun is patterned by time. “When” remains a more important aspect than how often can earthquakes repeat, a crisis occur, a stock rise, or an asset outperform. The focus on “when” can assist us more even if we don’t have a perfect answer. Time is perfect, our interpretation of it can never be.

We started the year attempting to time relative performance. We asked early January, if it was time for Grasim to outperform Nifty? Grasim was at the bottom of numeric rankings on 29 December 2009 and now it is at the top of list. What does this mean? This means that end of December Grasim was ready to outperform Nifty and it did. Long Grasim, short Nifty delivered 13 per cent in January. Now that Grasim has hit a top in rankings, a performance reversal should not be far away, when Grasim starts to underperform Nifty. The anticipated breakdown we have been talking on markets also happened. Metals, small cap and capital goods are ready to underperform the market. Tata Motors and M&M also seem overstretched in performance and should not sustain outperformance against Nifty for long. HDFC’s performance cycles continue to suggest that there is more catch up for the stock against Nifty; the stock should outperform the benchmark. If everything is cyclical like time suggests, research solutions of tomorrow might just simplify things.

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Comment

From E.D.G. February 1, 2010
http://www.freewebz.com/eq-forecasting/Data.html

Hi folks,

I saw one of your recent reports that compared market trends and earthquakes. The Web site listed above is one where earthquakes are actually being predicted. The forecasts are based on relationships between electromagnetic pulses and past earthquakes. Those data can be fairly accurate. A worldwide Earthquake Advisory was circulated on January 11, 2010, the day before the catastrophic Haiti earthquake. At some time, the main forecasting computer program called “Etdprog.exe” will probably also use data related to the time intervals between earthquakes. A different program discussed at the site called “Wave Chart” provides information concerning those types of data. But they are not yet being used in the actual forecasting program.

Regards, E.D.G.


Volatility and sleeping markets

Question: Are American and Indian markets sleeping?
Answer: Yes they are because in the last 20 days indices have moved a marginal 1%.

Question: How can we define sleeping markets statistically and psychologically?
Answer: Low volatility is a statistical way to explain the lackluster nature of the market. Low volatility is seen across global equity today. Low volatility is a sign of complacency that the worst is over. “Now we really can’t get back into the crisis”. “Crisis is behind us”. These are the inflexion points where markets face a surprise as volatility rises.

Question: One could say that Romanian markets are not sleeping as there is no volatility indicator?
Answer: Incorrect. Reuters has a statistical volatility indicator. A similar behavior like India and America, low volatility is happening in Romania too.

Question: How can one explain the market view based on the above volatility stats?
Answer: If volatility is about market activity, complacency and about cyclical statistics (after low volatility comes highs volatility) then the rise from Mar 09 low to nearly Feb 10 makes the current leg 11 month old. After 11 months complacency and drop in market activity cannot be considered positive. It is indecision. After low volatility comes high volatility and rise in volatility is generally a sign of fear not confidence. In conclusion we are heading into a time of rising volatility and exhaustion of the trend from Mar 09.

Romananian Statistical Volatility touches base

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Dow - Volatility Cycles

Foundation of Cycles


The Nuclear Decay

Nuclear tests have been conducted from July 1945. Trinity was the first fission device test, first plutonium implosion detonation in the United States. Since then we have seen a series of tests globally with more than nine countries conducting them. The latest one was conducted by North Korea in May 2009. This was the first successful fission device tested by the country.

Nuclear threats are a reality and a cause of concern for the global community. But is this more a factor of free will and arms race? Or are there intricate time patterns between peace and war that dictate the social mood and the events that result from that social behavior?

Patterns of time decay can be seen in this social phenomenon too. Power law practitioners may illustrate that the rule should hold in the number of tests and it does as the decay in Yield suggests. However, why does the same Pareto curve rule hold when we plot the number of days between nuclear tests? There should be something that the practitioners are missing here?


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 is not visible is a challenge.

Nuclear tests are not a creation of autocratic leadership, it’s a result of the changing time, which causes a need to break walls and sometimes build them back.

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Waves.Oil - Oil back to 60

This is what we said on 14 Dec in waves.oil.

“Till we see a clear break at illustrated channel levels, another leg to complete the final 5 wave structure can’t be ruled out.”

What happened? The previous 4 wave support held and prices pushed up in the final 5. The ongoing formation looks like an Ending Diagonal terminal formation. These are major reversal patterns, which retrace completely. This means a reversal from current levels will take Oil back to atleast 60.

The latest WAVES.OIL carries anticipated and happened cases on Heating Oil, Performance cycles on Natural Gas, XLE SPDR and IPNG (Nat Gas Index) and fractals of energy stocks from various regions. Natural gas may be hitting an intermediate performance top against Brent. However the primary (multi month) double bottoms suggest the Nat Gas secular bull has just started.

Enjoy the latest WAVES.OIL

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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

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DOW vs. Time Oscillator

Time Oscillator is a range bound indicator suggesting increase and decrease in time periods. Starting 30 Nov 1988, DOW witnessed a confirming increase in time periods till 30 Sep 1998. From 1998 time oscillator fell till 31 July 2001 along with the prices. Since 30 Apr 2008 the oscillator is falling till date. It is too early to assume that the rise in DOW is a new bull market and 2010 will be a positive year. Till the oscillator sees a further fall till 60-100 levels, the current rise on DOW remains a bear market rally that should correct into 2010.

Primary (multi month) perspective

Intermediate (multi week) perspective

Considering the primary (multi month) time is still pointing lower (above), the intermediate time oscillator at 250 days suggests an intermediate top might be near or already in. Only once since 2002 has the time oscillator breached 300 days.

Minor (multi day) perspective

On the minor time oscillator, the 2009 cycle seems over and prices should get ready to trend. Seeing the minor trend in light of intermediate and primary perspective, any January positivity should be an illusion. The first quarter of 2010 should be negative for DOW.

CYCLES covers global currency pair, global equity, emerging equity, and inter asset cycles. The product studies time cycle, asset outperformance and underperformance signals. The aim is to look at markets as a group and in isolation. This is a monthly perspective product that readers should use in conjunction with our other features like WAVES.GLOBAL , WAVES.INDIA, WAVES.FOREX, WAVES.METALS, WAVES.ENERGY, and other global features. Our economic and psychological world is well connected and cyclical. INTERMARKET CYCLES is a subject coined by us at Orpheus. The subject studies the asset linkages and the fixed periodicity between them. We look at the subject from three aspects. First from the sectoral aspect. As we redefine Equity sector rotation and reclassify global sectors into three broader sectors viz. Early Economic, Mid Economic and Late economic. We juxtapose these three broad sectors on the economic and business cycles. Second we look at subject from the 25-30 year Asset cycles. For example the 30 year Gold cycle and commodity cycle, which is inverse of the 30 year equity cycle or social prosperity cycle. Third we look at inter asset cycles between Gold and Oil, VIX and S&P, Technology and Blue Chips, Local Currency and numerous other asset pairs to look for asset outperformance and underperformance signals.

REUTERS RICS (METALS) - XAU=, XAG= (FOREX) EURRON=, RON=, JPY=, INR=, HUF=, HRK=, GBP=, EURCHF=, CHFRON=, CAD=, =USD, EUR= (GLOBAL) .BVSP, .IRTS, .FCHI, .GDAXI, .GSPC, .DJI, .N225, .SSEC, C.N, JPM.N, BAC.N, AXP.N, AIG.N, DIS.N, HD.N, GM.N, VZ.N, T.N, INTC.OQ, MSFT.OQ, HPQ.N, IBM.N, UTX.N, CAT.N, GE.N, MMM.N, BA.N, KO.N, MCD.N, - WMT.N, DD.N, PFE.N, MRK.N, CVX.N, XOM.N, PG.N, JNJ.N, AA.N (ENERGY) BRT-, WTM- , .XLE , CVX.N, XOM.N , IPNG , NG-P-CAL. (AGRO) COFSAN-4-NYC, SUG-DLY-ISA, .DJAIGCT, CCCI-NYC, CORN.L, C-US2Y-GULF,.SPGSCN, W-RJK-MLQ, .DJAIGWHTR (GREEN) - NEX, G3E.CO, EEN.PA, TEO.PA,.WOWAXPD,.GWE, HSNT.L,GAM, .SPGTCLEN, VWS.CO, FSLR.O, VIE.PA, ITT, .BIOX,ADM, BG, CSAN3.SA, .SUNIDX, QCEG.DE, 3402.T, 3401.T, CLIE.L

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