Archive for the ‘Time Triads’ category

Rubber Band Signals

If it was once a fortnight, once a week or once a day, it would have been nice. But signals and signal generators have no religion. If you need a signal, the market has it; for any market, for anytime. And, if you are not going to sue (challenge) the signal, it could come stamped with 100 per cent accuracy.

Signals have become like a rubber band. You can stretch them for any time frame and from any side; long or short. But this creates conflict, on one side the society can generate so many signals, and on the other hand it barely outperforms the market. This is the reason passive indices claim, “What good is active anyway?” We live in the times of limited Alpha (risk adjusted return) but unlimited signals.

We punish politicians, punish insiders, punish scamsters, but how ethical are we ‘the signal society’ which seeks and delivers signals. “Please give us a signal, don’t explain us cycles, history, perspectives, risk; just tell us what to do, buy or sell?” Now that the markets have moved sideways for years, how happy are we triggering?

Okay, what should the signal society do? What can it do better? Can we simplify? How can it bring objectivity? Apart from building signal systems that work across asset classes, signals that can be indexed, signals that also assume lower risk, we can relook at the whole signal generation process, the big picture view.

Since we are looking at the same elephant, the rubber band can be viewed differently. If the market is indeed a rubber band, speculators, investors and other market participants pull the band at extremes. The best performers see consistent interest as they move higher. While the worst performers continue to see continued selling pressure as speculators suppress price and investors exit, tired of waiting for a reversal.

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 5minute Year

When Mark Twain popularized the saying “lies, damned lies, and statistics”, he must not have thought about it temporally. The statistics of today can seem irrelevant tomorrow. Society found it hard to rely on statistics for future trend forecasting. What will happen tomorrow is hard to judge from statistics of today. Such is the divergence between any two periods of time that calling all statistics a lie might have eased some pressures for policymakers and thinkers juggling with data, trying to make sense of it.

Even today we are struggling with the same challenge. We have so much data and data analytics, but we still can’t see very far in future. EURO is a clear example how limited our ability is to anticipate the future. Leave aside 2 years, even a 12 month outlook is a tall task. What happened? Why is the society skewed to the 5 minutes (shorter time) and why does it find it hard to look ahead into the year and take risks for longer term. Can you buy TCS for 5 years? Or can you sell Reliance for 3 years more?

Technicals, fundamentals and quantitative techniques helped breach the multi month outlook. Behavioral techniques illustrated seasonality in 3 year investing horizon. More than 3 years were for the celebrated money managers. And going into a decade long holding was for the entrepreneur. Few invest a decade of effort into an idea. And guess who tops this list of holding periods. The common man, who does not invest in stock market and assumes (or unaware) that he (she) is insulated from the stock market vagaries, is the one with the longest holding period. He keeps holding, never exits.

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.


Higgs Boson and cycle theory of everything - I

Many Physicists assume TIME to come from Einstein’s space time geometry. Space time is at the heart of string theory, which is connected to super symmetry and which leads us to HIGGS, the Goddamn particle rechristened as ‘The God particle’. The particle we have almost found.

Did it occur to the physicists (ok! not all of them) that what if the assumption of TIME being a fourth dimension was wrong? A few of them have written “Was Einstein wrong? Tim Maudlin’s book (1994) on Quantum nonlocality and relativity says that the special theory of relativity claim about the geometric structure of space and time is incorrect. What if 3D TIME equaled 3D space? What if the symmetry we are seeking among subatomic particles also existed in TIME?

Symmetry of time means there is a moment when time symmetry starts and time when the symmetry completes before starting again. We first wrote about these repetitions, entropy and questions in Jun 2009 (Space and Time).  Now when the physicists are still divided, Stephen Hawking continues to consider time as imaginary and we are still almost reaching HIGGS, it would be interesting to see when the term cycle was coined and where have we reached in our cycle (TIME) theory of everything.

Crisis and depression have been regarded as successive stages of an extended period, to which the name cycle has been given, and which embraces all the varying conditions from the highest degree of prosperity to the lowest point of depression. The word cycle, with this general meaning was used by William Petty as early as the year 1662.

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 Benner Dow

Benner’s Prophecies - Future up and down in prices was written in 1875. Samuel Benner was a prosperous farmer wiped out financially by the 1873 panic. He turned to wheat farming in Ohio and took up the statistical study of price movements as a hobby to find, if possible, the answers to the recurring ups and downs in business. He noted that highs of the business tend to follow a repeating 8-9-10 yearly pattern. With respect to economic low points, he noted two series of time sequences indicating that recessions (bad times) and depressions (panics) tend to alternate. The panic years reflect a repeating 16-18-20 pattern. E R Dewey, Director of the Foundation for the Study of Cycles, assessed Benner’s pig iron price forecasts over a 60 year period and regarded this cycle as showing a gain to loss ratio of 45 to 1, which was “the most notable forecast of prices in existence”. Benner’s cycle worked well throughout the 20th century and was a very good indicator of US crises and/or recessions. These cycles were aligned with observed chronological trends. Frost and Prechter republished the Benner Cycle and updated it in 1978. We have updated the Benner cycles. They suggest a top in 2010, a slowdown and low in 2011 a cycle high again till 2019 and then depression in 2021. But before the depression, the Benner cycle suggests multi year prosperity. We have also updated the Benner Cycle for Sensex India, Brazilian BVSP and SSEC Shanghai Index. The Benner cycle does not work on Gold, Oil and currencies.

 


Dr. Ionut Nistor is the co-author of Performance Cycles paper published in Kyoto Economics Journal in March 2009. Ionut is a professor of Corporate Finance at Babes -Bolyai University and a post doctorate fellow at the Kobe University in Japan. He is fluent in Japanese, Romanian and English.

The Bric Model from a Japanese Perspective
Ionut Nistor - Econohistory


The Vicious Forecast

It took me a long time to learn that instruments and forecasts don’t make money, risk management does. If you are in capital markets, forecasting is paid work, a job, a vocation. Predictions are all over the place. What’s a prediction? Euro will die or Nifty will reach 8,000 or Gold will rise are all predictions. “That new Tom Cruise film will be a hit.” Whenever we say “will”, we attach a 100% probability to the event. A lot of times I ask, “How can you be 100% sure?”

Is there a way to outperform the market and not use a prediction? Well we may not have cured ourselves from the forecasting passion (or vice) yet, but as we move towards systems, the only forecast we would like to do is that performance is cyclical and the worst performers of yesterday become the winners of tomorrow. This phenomenon of reversion is not a prediction or a forecast, but a visible reversion seen in outliers. But then what should we do about our need to forecast or follow our intuitions.

According to Daniel Kahneman, “Following our intuitions is more natural and somehow more pleasant, than acting against them it’s natural to generate overconfident judgments because confidence, as we have seen is determined by the coherence of the best story. However, we are not all rational, and some of us may need the security of distorted estimates to avoid paralysis. If you choose to delude yourself by accepting extreme predictions, however, you will do well to remain aware of your self-indulgence.”

So much we suffer from forecasting that we just can’t leave an opportunity to predict. ..

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.


Love Thy Nifty


From start of the year a business TV program editor wrote me numerous mails to have me as a market commentator during my next visit to London, Delhi or New York. And after I finally made it to the hot seat, it turned out to brief affair.

TV Host” Mukul what is your view on the market?
MP: “We are long on the market”
TV Host” Why is that so?
MP: “Because Indian markets have underperformed its global peers and this underperformance should reverse and lead to performance”

And it was over. It took me a while to realize that our work on mean reversion did not generate causal explanations. The mind is strongly biased towards causal explanations and does not deal well with “mere statistics”. There is an insistent demand for causal interpretations. When our attention is called to an event, associative memory looks for its cause and causal explanations are evoked whenever regression is detected.

According to Daniel Kahneman (Nobel Prize 2002), humans love this narrative causality. “However, the explanations are wrong because regression to the mean might have an explanation but it has no cause.” Regression is a temporal event.  In his book ‘Thinking fast and slow’, he explains mean reversion and how society pays people quite well to provide interesting explanations of regression effects. A business commentator who correctly announces that “the business did better this year because it had done poorly last year” is likely to have a short tenure on the air. The phenomenon of regression is strange to the human mind. Simply putting mean regression suggests that “what goes up comes down and vice versa.”

It’s this love for narrative causality that keeps us hooked to the “love thy Nifty” spell, so much so that the talk of Nifty and 5,000 can be an endless market saga.

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 doomed outlier

A friend took me out for coffee and gifted me Gladwell’s outlier at the 2009 bottom. “This is dedicated to your doomed outlier”. During those murky times the negative outliers were moving to positive polarity (worst stocks were becoming potential outperformers). Three years later and many outliers later, Gladwell’s lucid narrative on history of success started shinning bright in my heap of books. It was time for me to read it and explore the connection between price performance and success.

For Gladwell success was being at right time and right place. He connects historical success stories of 150 years to explain how success was not just an act of genius but a series of circumstances that created Gates, Jobs, Rockefellers, Beatles etc. The author goes step by step demystifying the process of success. Starting from IQ surveys which were mapped with success over a decade, the author illustrates how intellect and achievement are far from correlated. How there were more Nobel Prize winners from outside Ivy League.

According to Gladwell, “power distance index,” is a term from cross-cultural psychology describing the hesitancy of subordinates to question superiors. Culture can effect catastrophes and create superstars. He quotes Asian persistence as the reason why Asians are better in mathematics. Uncertainty avoidance i.e. how well a culture tolerates ambiguity is also cited as reasons for poor performance. Coincidently it’s Greece and Portugal that tops the list.

Coming to look at it, what Gladwell suggests is that success is to a certain degree random. If you were born at the right place at the right time and done the right things, you would achieve success. Just doing the right things was not enough, the combination of when and where was magical. The Gladwell opinion is old wine in new bottle. Taleb said it in a different way….

You can read the complete article in 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 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.


Long India, Short China - II


Cycles can sometime evoke a shocking response. The reason is that they assume a historical seasonality to continue. This is hard for a section of the market which believes that only new information drives the future trends. New academic work has given credit to economic historians and seasonality has been given more importance than earlier. But even if seasonality does get accepted academically the ‘Madness of crowds’ as MacKay mentioned in his work in 1850’s will continue to disbelieve that an order like cycles work.

Starting 2009 Indian Sensex has outperform Chinese SSEC by 25%. We first wrote about it on 23 Feb 2009. 

We were forecasting performance cycles for 2009-2010 and 2012-2015 time windows. Our findings reinforced our initial hypothesis that BRIC is more polarized than the Goldman Sachs’ model assumed. Within BRIC also Russia should outperform Brazil, and India should outperform China over the next decade.

Our Jiseki cycles have captured the essence of relative performance between regional Indices. As you can see in the image below, India underperformed China till 2008 lows and after that India has outperformed China. This seasonality will change again sometime in the future. When it does, the Jiseki pair cycles will turn in sandy colored again.

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 Crazy Consumption

 

Most of the time we make a buy or a sell case, rarely do we look at stock market trends from a consumption point of view. Markets work with a multitude of external factors, consumption is one of them. But if the broad consumption trend is up, the society will not just gobble up cars, burgers and films, it will also gulp down stocks and investment ideas.

But then one may say that such connections are not linear, consumption is also about basic needs. Out of the 10 broad economic sectors around half are linked with direct societal consumption. The consumer discretionary sector includes stocks that sell products (or offer services) that consumers do not necessarily need (like consumer staples), but that they want. The consumer discretionary includes auto related, entertainment, home appliances, homebuilders, retailers etc.

Auto, FMCG, BSE Consumer Durables were the top performers since 2009. And this has not been just an isolated case for India. Even globally the consumer discretionary or retail ETF SPDR is the top performing sector. This means that society is not only consuming, it’s on a consumption spree.

A society does not consume because …

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.