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Chart of the Week
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Chart of the Week
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Technical analysis is about weight of evidence. More the indicators pointing in the negative side, the more negative the market and vice versa. Technical analysis is about Intermarket. Everything is connected. This means if we look at the CEE (Central and Eastern European) market, we should get some cues where Europe is headed and also get Q1 2012 cues regarding the global equity bias.
Here we are looking at Hungarian BUX, which seems to have completed a five wave impulse up and a three wave corrective down.
Now an Elliottician might contest or confirm this count. While the Intermarket analysts might say, “Look at the Romanian BETFI, which has a similar count like Hungarian BUX but an unclear five wave up.” And if Intermarket is true one of the counts is write either the Hungarian BUX or the Romanian BETFI. One of them is going to decide whether market attempts a low below 2009 or starts a new leg higher into 2012. 
There is another reason, which Elliotticians can give. A cycle degree can bottom with a three wave structure and may not need a five wave structure. This is why Romanian markets could bottom with a three wave rather than a five wave structure. This means that whether it's Mar 2012 or Dec 2011, the Romanian Equity could be ready to move higher in a new impulse up. 
Now if we have to confuse the Elliottician we can show him the price chart of Austrian ATX, Polish WIG and the CEE Index, a composite of all CEE indices. Now the aim is not to confuse the Elliottician, but to remind him that there is subjectivity in counting waves even if Intermarket support is assumed. Orpheus Jiseki on the other hand is a basic indicator which illustrates where the Hungarian BUX and Romanian BETFI or CEE indices are on the larger performance scale, in the top, in the bottom, in the middle. If there are on the top, no Elliott wave positive counting would help and if there are at the bottom, even the most negative counts on Elliott might not take the respective indices lower. The Jiseki is a performance time cycle for an asset and a valuable tool to fine-tune Elliott and Intermarket cases.
The CEE Index Jiseki is already at the worst ruling at sub 20 percentile readings. This suggests that the despite all negativity in Europe at least parts of CEE region is already at its worst and to expect consistent selling pressure to take markets secularly lower in 2012 might be a tough task for bears. The odds are favoring the value pickers and bulls. If we look at things separately, the Austrian ATX (outside CEE) is still at 55 and has no reversal signs. Romanian BETXT (top 25) is sub 30 suggesting relative value. A whole new Intermarket case can be made from Jiseki, to understand Intermarket cases, whether Long German DAX short Sensex is workable or is Sensex Ready to outperform CEE and EU region Indices. 
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research |
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Chart of the Week
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S & P SHORT INDEX
To understand market perspective we also cover global short indices. Short indices are inverse of the regular market indices and move up if markets fall and vice versa. A view on global short indices can also give us cues whether markets are ready to bottom yet or there is more negativity. The following 4 short indices on S&P500, DOW30, Nasdaq and broad Russell are at extremely low rankings. These means that short portfolios on US markets were the worst performers. And for us at Orpheus, whatever is worst is not going to be the worst in the time ahead.
This means that US Indices might underperform leading to delivery on SHORT portfolios on US indices. This also suggest that it still might be early to look for a bottom on India or emerging markets and the MAR 2012 lows could still be a reality. We are still expecting a weekly positive close above 4750 levels before taking this bounce seriously.
The short S&P Jiseki has an uncanny similarity with what we are observing on BSEAUTO, BSE Health Care and CNXIT Jiseki, which are on the other topping performance extremes. Predicting future is a hard deal, it gets harder when it comes to predicting Time. However, from technicals we have learnt that larger weekly cycles are more important than daily and so on. So as the Jiseki cycle length goes up, it gets more important but poor in senstivity.
This could explain doubts regarding why could Jieski for Short S&P could struggle for another year. On one side this is a correct observation, however, there is another missing aspect here. What could actually happen is also connected with what the Jiseki cycles are doing at the next higher time degree. Remember Jiseki are nested cycles and to understand whether markets are going up for 2012 and then lower, markets are going for few years and then going lower depends on the overall Jiseki complex. When we say “next higher time degree Jiseki” we are referring to moving from multi month to multi quarter Jiseki cycles.
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research |
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Chart of the Week
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There are many opinions about such large scale forecasts. One is that in such a dynamic society, large forecasts are academic. Second view is about the real viability of Elliott as a predictive tool. We all know how poor Elliott is in timing, so even if the forecast turns right, but years off the time target, it's a poor forecast. And third opinion is about what situations have to happen for long term forecasts like this to happen. We agree that long term forecasts are academic and need more work than Elliott counting. Such multiyear forecasts need to be backed with time cycles and Intermarket reasons. After such a thorough case is made one can objectively judge a multiyear forecast on a global currency. Now here we have illustrated a previous anticipated multiyear triangle from 2007, which we expected to push Yen from 120 to 80. Now that prices reached sub 80, we have looked at potential reversals. A few reasons for a reversal, 1) The leg down from the triangle is proportionate to the overall structure and indeed could be a completing final leg of multi decade strengthening on Yen vs. USD. 2) The non confirming momentum of 30 years and oversold situation suggests a potential reversal. 3) Multiyear and multi month Jiseki multiyear and multi month is negative for FXY (YEN ETF) suggesting weakness. The quality of the bounce will tell us whether we are indeed in a secular weakness on Yen or we have more strengthening left. A valued reader and hedge fund manager on forex had this to say regarding my comments on Yen. "Yen the $150 really requires an implosion in Japan. This leads us to the ultimate question of the 30 year equity bear market in Japan will this create the final low for the Japanese market? The basic premise that you work with today in the market is volatility not value and the right focus is making the cost of time cheaper in either direction simultaneously?"
This is what I had to say. 1) If 120 to 80 happened in 4 years, a multiyear move back should also be easier. 2) I think the Gold vs. Yen is the last stand before Gold becomes the real currency. So if traders feel they have missed on Gold, Short Yen offers a chance to indirectly ride Gold performance. 3) I think currency and equity correlations are overplayed, a weaker Yen could make Japanese companies more competitive and hence a state better equipped to handle debt or any implosion. 4) The reconstruction after Miyagi earthquake itself creates more economically than it destroyed. The reason Economist article on Japanese Economic also challenges the pessimistic view about Japan. Whose lost decade? http://www.economist.com/node/21538745?fsrc=scn/fb/wl/ar/whoselostdecade
But still in the end, it still comes back to timing the move (judging the pace of volatility) for which we rely on Jiseki.
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research |
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Chart of the Week
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Realistically speaking, the answer to this question is both yes and no. If you understand that performance is different on different time frames. On one time frame (example 3 months) Oil can rise and silver can fall. While on another time frame (say 12 month) the difference between the two can narrow. So both respondents could say "see I was right?" This is what always happens in market. Both the respondents claim to be right because they don't understand their different holding time frames. This is why the question itself is ambiguous.
Why don't market participants see the ambiguity in any such question? Because they don't expect accuracy in time. They don't accept any tool or measure to illustrate polarized performance of assets in different time frames. Why don't investors expect such accuracy? Is it because no such predictive tools exist or because they can't exist?
The truth is that we never looked for such tools or measures. We assumed that if a trend starts for 6 months, it could very well persist for 12 months. Now this is where the problem lies. Most of us are momentum investors and just understand momentum. Most of us don't understand cyclicality. So we never question that can performance of 6 months be different from performance of 12 months. Most of the time this is true, performance differ for different times. But there are rare occasions when two time fames could confirm the trend and this is when real strategies should be executed.
This is what is happening on SILVER (SLV) and OIL. Here we have illustrated Jiseki cycles for primary multiyear trends. Silver is a top performer on both multi week and multi month Jiseki cycles, while Oil is a worst performer on multi month and multi week Jiseki cycles. This means that Silver should underperform and Oil should outperform on both multi week and multi month periods.
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research |
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Chart of the Week
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I was at the CSTA (Canadian Society of Technical Analysts) annual event at Toronto. It was a two day event where many speakers talked about volatility. 'The New Normal' was the theme of the conference. Richard Rhodes, award winning newsletter writer and now asset manager, talked about VIX at and above 45 levels. He illustrated how this was infrequent event, which had happened 120 times over the last 20 year history of VIX. There was a monthly Key Reversal on VIX. He emphasized that monthly KR was a strong signal that worked. He overlaid his VIX case with Intermarket sector rotation, explaining which sector he would over allocate and vice versa. He also showed the historical workability of S&P500 with such spikes in VIX. Ralph Acampora, founding member of MTA illustrated VIX with an overlay of historical news and talked about markets as a discounting mechanism. He also illustrated the similarities between sideways action on 1964-82 and the ongoing sideways action from 1998-2011. He also talked about low volume markets and choppy price action and how the current volatile swings could be a consolidation stage that could lead to further upside. Benner cycle low of 2011 confirms Ralph’s view. I have illustrated the two sideways actions. David Hickson, an expert on Hurst Cycles illustrated the Hurst complex on the VIX cycles. His cycle perspective suggested a rising volatility well into May 2013. Hurst nested cycles were able to identify 2008, 2002, 1998, 1994 and 1990 spikes. VIX interpretation is an essential part of a technician’s tool box today not only because it’s a sentiment indicator but also because VIX looks at the broad S&P500. The Jiseki cycles on VIX on an intermediate multi week cycle turned positive on May 2011 and VIX is still among the worst 5% quarterly performers among a global composite asset performance. This means that there could be continued rise in volatility till the Jiseki cycles turn down, whether it breaks or retests 45 however remains to be seen.
Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research |
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