Archive for the ‘Patterns and Proportions’ category

Dow @ 20,000

Proportion is mathematical. This is why Elliott beautifully illustrates the proportional structure on markets. In this update we question some Elliott assumptions and highlight some observations on Dow Jones Industrial and the overall market structure.

Fig. 1: This is a classic five wave structure from 1789 to 1990. The 1990 highs seemed like a top, but markets continued to extend more than a decade after the respective high well into 2000.

Fig. 2: Elliott Wave structures give 2000 top a high importance. This importance rests on the super cycle fourth wave low at 1982. If that low is assumed to be in 1975 and not in 1982, the count would change. This would suggest that the all time top is still not in place and markets could extend higher above 2000 all time highs.

Fig. 3: This is the five wave structure from 1932 lows.

Fig. 4: This is the five wave structure from 1975 lows. As one can see the time taken by the second wave is marginally smaller than the time taken by the IV cycle wave (3300 days). The difference appears large on a visual chart with an arithmetic scale, but on a log scale both price and time suggests that the Dec 1974 and Aug 1982 price structure (1 and 2 cycle wave) can be compared with the Jan 2000 and March 2009 structure (III and IV cycle wave).

Fig. 5:  All the above cases suggest that if we extend the channel high of the supercycle count (Fig. 3) the DOW structure can see an extension till 20,000. Terminal waves are very tricky and this is not any terminal wave. This is a terminal wave of all available history of markets. Two decades of error in a history of pattern watching and Elliot counting from Dark Ages in 1330 should be acceptable.

Till 12,000 and 11,000 supports  stand firm on DOW, this preferred stands firm for us.

I guess Bob (Robert Prechter) can answer this better than anyone else. Bob what do you think?

 

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 Creative Leverage

 

Juicing the orange was a wonderful book I read in a long time. An economist dabbling with an ad book and writing about one might seem strange, but then are markets not about understanding trends, society, innovation and creativity. The book written by Pat Fallon founder of Fallon worldwide suggests creative leverage as the solution.

Fallon’s used creativity to offer real solutions for many brands. The case of ArcaAEX was unique. In 2002, the Securities and Exchange Commission (SEC) approved ArcaEX, as it was then known, as a full-fledged stock exchange so that it could directly compete with the New York Stock exchange (NYSE) and the Nasdaq. ArcaEX was virtual. It had a visibility disadvantage. By the end of the promotion 65% of professional traders used AracaEX. By 2005, the electronic stock exchange technology was accepted by traders. That fall, the 213 year old NYSE announced that it would merge with ArcaEX. Creativity overlaps. Just like ArcaEX used it to change the industry, Fallon used creativity to promote the exchange.

Somewhere creativity was about starting from scratch. It was about relentless reductionism, reducing the problem to a single insight. It got me thinking about creativity. What does creative leverage mean in capital markets? What hampered it all this while? Why don’t we have numerous ideas to make money? Why financial innovations suck? Are the economists really being creative? Or is economics so far from advertising, which is fun? Was creativity not about solutions and fun? In 1997, California Management Review published a study that investigated how experts in fields ranging from physics to art to business felt about such abstract concepts as wisdom, intelligence and creativity. It was only the businesspeople that tended to believe that it was unwise to be creative….

To read the complete article visit 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.


The temporal value

 

Societal quest for value is continuous, repetitive, similar, connected with cooperation and patterned.

I don’t know who is better, Clint Eastwood or Rajkumar Hirani. I saw two back to back films, one was ‘3 idiots’ on Thursday and Friday it was ‘J Edgar’. Though this non confirms my (self proclaimed) film buff status, I took a while to catch up on the top grossing cinema creations. Blockbuster or award winning films force you to think, relate and see patterns irrespective of the settings, regional or global.

The search or quest for value has started to emerge out of the societal expression, be it films, books or protests. Whether it was Chetan Bhagat’s famed work, a Bollywood adaptation or Eastwood and DiCaprio’s attempt to educate Americans and the world about the workings of FBI and science of investigative innovations, there is a visible creative attempt to cherish the value of history and acknowledge purposeful life over corporate rat race.

The continuity of value…Value expressions have continuity because revolutions happen, creative expressions are awarded and history prospers, as we keep revisiting it. A failed present and murky future outlook keeps sending the society back to the past, to seek lessons from the valuable old. This ‘value revisiting’ also creates science as we keep refining our value measuring systems. Edgar insisted on a centralized finger prints depository to enhance investigation. What seemed ridiculous then turned out to be a necessary innovation.

The continuity of value can also be witnessed in the similarity of times…

To read the complete article visit Business Standard.


The lost beetle

Do you know how many times you use “Probably” in a day? The word is a part of our colloquial expression because society embraces uncertainty, disorder and randomness as natural. Whether it’s a rolling die, a tossing coin, or an event, uncertainty is everywhere. This is why the society believes that a butterfly’s wings in Brazil can set off a tornado in Texas.

But mathematicians have illustrated a very contrary certainty again and again, the certain pattern of randomness. Imagine a robotic beetle placed in a twisting tube. The creature executes an infinite random walk by walking forever as it moves randomly one step forward or one step back in the tube. Assume that the tube is infinitely long. What is the probability (chance) that the random walk will eventually take the beetle back to its starting point?

In 1921, Hungarian Mathematician George Pólya proved that the answer is one – infinite likelihood of return for a one dimensional random walk. If the beetle were placed at the origin of a two – space universe (a plane), and then the beetle executed an infinite random walk by taking a step north, south, east, or west, the probability that the random walk would eventually take the beetle back to the origin is also one.

Let me take you through some more random patterns which has intrigued mathematicians for ages. Parrondo’s Paradox. In the late 1990’s, Spanish physicist Juan Parrondo showed how two games guaranteed to make a player lose all his money can be played in alternating sequence to make the player rich….

To read the complete article visit Business Standard.


The Greedy Cluster


Emotions are as mathematicaly ordered as stars in the galaxy.

Are emotions subjective or objective? Why investors are known to buy high and sell low? Why do we overreact? Why do we exaggerate? Why are we greedy? Why does the society panic? Why majority of us move with the trend? Can we define happiness as a mathematical function?

If we could do this, we could change our understanding of the society. We could understand how the society thinks and how it acts. Businesses could understand consumption patterns, target audiences. It could open up new ways of marketing and advertising.

The recent Economist article illustrated the correlation between money and happiness. If money and happiness were studied on an arithmetic scale, money it seemed could not buy happiness, the correlation was poor. But when similar GDP data was plotted along with life satisfaction on a logarithmic scale, the relationship between income and happiness looked more robust. The author does not make an attempt to explain why this happened. Logarithmic scale compares proportions. Somehow the pattern of increasing income was similar to increasing happiness. This lead to a more robust correlation compared to the initial belief that money and happiness correlations weaken beyond a GDP per capita of $ 15,000.

To read more visit Alrroya.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.


The Benner Prophecy



Benner’s model of ‘Time’ predicts a mini crash in 2011, a boom till 2019 and a depression in 2021. He was the first one to talk about hierarchal ‘Time’ in 1875.

Benner Samuel was a farmer from Ohio who wrote his prophecies in a book about price fluctuations in 1875. The 19th century was also the time of Laplacian probability, Gaussian distributions, Peano curves and Cantor set. While mathematicians were looking for structures in mathematics, Benner was studying and writing about a model of ‘Time’ to forecast the future.

Benner lived in an era of Axe Houghton Indices, the time when Chicago Board of Trade was established and agricultural commodity trading was active business. Society was busy with agriculture and expanding railroads. This is why his workings were based on pig iron, corn, cotton and hogs. Along with agriculture came the essential science of weather forecasting. What years would be dry or wet? When we may expect years of heat, storm an cold? Agricultural statistics was compiled and used to establish demand and supply patterns. It was then 135 years back Benner wrote that the future cannot be calculated based on agricultural statistics. Statistics compilation according to him would remain always poor, irregular, manipulable, undependable and non predictive.

This was the reason he focused on history…

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Alrroya


Benner, Pareto and the structure of time

Benner was the first one to illustrate time hierarchy and Pareto showcased hierarchy in everything. Could they have connected the idea in 1900 before the Pareto curve?

Benner’s Prophecies - Future up and down in prices was written in 1875. A keen technician will sooner or later hit the fascinating time geometry of the Benner cycle. 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.

I updated the Benner cycles and they suggest a top in 2010, a slowdown and low in 2011, a cycle high again till 2019 and then depression in 2021.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Association of Technical Market Analysts


Life and coastlines

Some problems span multi generations, Benoit Mandelbrot solved one such problem and earned himself a well deserving place in history, as the father of fractals.  Many of these mathematical structures and their descriptions go back to classical mathematics and mathematicians of the past like Cantor, Peano, Hilbert, Koch, Sierpinski, Julia, Hausdorff, but it was Mandelbrot who extended the early topology. Fractals solve the problem of how to organize complicated structure in an efficient way. Of course this was not what Peano and Hilbert were interested in almost 100 years ago. It was only after Mandelbrot’s work that the omnipresence of fractals became apparent.

Mandelbrot was a visionary in his ability to connect mathematics and patterns. He too like many other great thinkers worked on ideas of aggregation, simplification, order, efficiency rules, cyclicality in errors, interconnectedness of nature through geometrical structures. Mandelbrot illustrated that very simple formulas can generate objects that exhibit an extraordinary wealth of structure. His work encompasses mathematics, physics, economics and diverse other fields of physical and social sciences, music and art. He died on 14 Oct at the age of 85 after suffering from pancreatic cancer.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Alrroya


The Information Pattern

Information like everything else in nature is mathematically patterned. Understanding the pattern can help us make more sense of information.

Coming to look at it, we don’t trade or invest in assets but their intrinsic information. It is this information that gives them value. The relationship is considered linear between information and value, the higher the quality of the information, higher the perceived value in the assets and vice versa. For example, the value of Oil lies in the information code bits in it. Oil is going to get over, demand will overshoot supply, future is inflationary are some of the information bits that drive the price of Oil. A similar information code also works for Gold and other assets. It’s like DNA with a different code, but similar double helix structure.

However, that’s not how the society knows information. The masses know information as something that they read in the newspaper, something that they see on TV, or read on the web. It’s all about making sense of this clutter. The very fact that humans think there is a certain disorder in the information that they assume the confusion that comes with news. If the information works for us, great, If it does not, we accept it. We have learned to have fewer expectations from information.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

Time Triads, Time Fractals, Time Arbitrage, Performance Cycles are terms coined by Orpheus Research. Time Triads is our weekly market letter. The report covers various aspects on TIME patterns, TIME forecast, alternative research, emerging markets, behavioral finance, market fractals, econohistory, econostatistics, time cyclicality, investment psychology, socioeconomics, pop cultural trends, macro economics, interest rates, derivatives, money management, Intermarket trends etc.

This article is written for Alrroya


The excitement cycles

National Aeronautics and Space Administration
Sunspots

A J Tchijevsky’s excitement cycles, reopens the debate of Time.

The success in the new age is a lot different from what we experienced 11 years back. The shy public which needed market research surveys to bring out feedback is keener to offer comments. There were 30 odd comments on the Oil forecast, 398 comments on a dirty sport tackle on the yahoo sports blog and 425 comments on the 13 year old Everest climber. Are we in excited times? Or do you think we as a society are a bit less excited than what we were a few years back? Do these times polarize us as a society? Do we become indifferent? Is there some way we can quantify excitement? Can this quantification help us forecast? Can it tell us before our odds of success or failure? Can it tell us how to plan our investments and life? Can it tell us what movies to make? What products and business to launch? Does this excitement ever fall? Simply we are asking ourselves is excitement cyclical? And if it is cyclical, is cyclicality a science? But before we come to the science part, how time cycles are measurable and how it can revolutionize our understanding of the world around us, let’s have a closer look at excitement.

In December 1926, at the annual meeting of the American Meteorological Society Professor A J Tchijevsky’s (researcher at Astronomical Observatory, Institute of Biological Physics, Archeological Institute, Moscow) paper was presented, which elaborated the index of Mass human excitability, 500 B.C. - A.D.1922. This index showed a consistent pattern of 9 waves of excitability per century over the entire span of 2422 years. The index was compiled from detailed statistical researches in the histories of 72 countries and nations of the world.

Tchijevsky found not only that this index was characterized by the 11.1 year cycles, but that the crests of these cycles tended to correlate with crests of sunspot cycles. “In the paper published in the Cycles magazine of Foundation of Cycles 1968 issue professor quotes” As soon as the sunspot activities approaches its maximum, the number of important mass historical events, taken as a whole, increases, approaching its maximum during the sunspot maximum and decreases to its minimum during the periods of the sunspot minimum. Each cycle is divided into four periods. Minimum of excitability (3 years), Growth of excitability (2 years), maximum of excitability (3 years), decline of excitability (3 years).

Over nearly a hundred years since the research was published, a few things have changed. In the extreme point of the cycle’s course, the tension of the all human activity falls to the minimum, giving way to creativity and a general decrease of military or political enthusiasm, by peace and peaceful creative work and a disintegration of masses. The last sunspot cycle started in 1998, peaked in 2000 and bottomed in 2009. The society emerges out of excitability lows.

Now this is where the observations begin. The human excitability is at a 11 year low and we are in a few years of growth and prosperity. This might sound surprising and contrary to popular belief that we are in for a double dip recession. Excitability cycles tell us that from the lows in 2010, a multiyear equity bull should emerge. But there are strange coincidences here? Excitability cycles are not only in sync with sunspot cycles but also with a decade long Clement Juglar cycles.

The scientists say, don’t show me cycles and patterns coincidences everywhere. Show me the proof. Even professor Tchijevsky’s work did not get so much popularity as few could explain why excitability index was leading the sunspot cycles by an average 12 months. At some stage of thinking cyclists wondered that there was a force that affects both human beings and sunspots simultaneously. Proving why periodicity happened takes time cycle analysis to a scientific level.

Scientific rationalism against Time can be sticky ground. Specially because there is a lot more than empirical proof out there which suggest that time is mathematical and ordered, the reason for the coincidences, sunspots, growth etc. The first proof is History itself. Though the society uses the cliché that ‘history repeats’, it never asks is repetitive history not periodicity, recurrence in time, time cyclicality? Other clichés like ‘space and time are unruled by any law’ interferes with the truth. The whole idea is that if Einstein could not understand time, who can? History was always considered knowledge not science. Karl Lamprecht, German Historian showcased the order, history’s practical purpose was always considered doubtful. How naive of us.

Time is exponential and it is the one which gives nature and society its cycles. Periodicity and recurrence happens in society and stock markets because of this order. Time is why everything natural is cyclical, even human excitement. We can connect Sun with excitement or anything else, our behavior as a society is predictable. It was too much of a truth then when Professor Tchijevsky was jailed. How much of it is a truth now? We will see.

This article was written for Alrroya

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