This update on ALPHA INDIA will take you through the mechanics of trading or investing based on the product signals. The pair trading strategy is divided into three different time horizons viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). We will call the portfolio with the respective names. Every pair has been classified. The above pair i.e. CNXIT-NSEBANK (IN2) is a pair between the Indian Technology index and NIFTY 50. The tracker illustrated above is a SUB MINOR portfolio with short term trades. The open date is at the top right corner.

The signals for this tracker generally repeat every 23 days. The +A – B notations suggest that the strategy is about buying CNXIT and selling NSEBANK. Now a trader should keep in mind that short term signals are only suggesting short term CNXIT outperformance against NSENBANK. The net unit return (assuming risk weighted baskets) is 3%. Time Arbitrage is an attempt to reduce risk per unit of return, but a seasoned trader knows that risk can never be eliminated and riskless arbitrage, a term quoted in finance textbooks does not exist. This is why though backtested results show limited drawdown, we have a stop loss limit at 4%.  Leveraged traders should try to diversify with multiple pairs in a portfolio. ALPHA.INDIA plans to have 10 pair portfolio next month. Please review the product everytime for fresh signals. The report carries other entry signals for other pairs.

Please feel free to mail us for any clarifications.

Enjoy the latest ALPHA.IND

*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.

ALPHA is a pair trading strategy product based on TIME ARBITRAGE, a term coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and binary charts. The product carries running performance portfolio tracker and give clear entry and exit signals. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.

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This might look like a learning curve, but it’s an arbitrage curve for me. Pair trading in Indian markets is an exciting experience. Even as early as 2000 I remember working on cash-futures, futures-futures arbitrate sheets on the BRIDGE TERMINAL at the 24 floor of the Bombay Stock Exchange, teaching brokers how to execute riskless strategies. If this fascination for ARBITRAGE was not enough, I ended up designing CALENDAR SPREAD strategies for brokers in ROMANIA. Now after nine years of this journey I am not surprised introducing the new Orpheus ALPHA INDIA pair trading strategy product. This product is based on TIME ARBITRAGE.

The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. In the debut product we are carrying backtested results from three pairs (CNXIT-NIFTY, CNXIT-NSEBANK, RIL-ONGC). The signals will be illustrated through a BINARY CHART (SLIDE1). A positive 1 will initiate an open pair position and 0 will be a signal to close. We will also be carrying a live performance portfolio tracker.

Despite the fact that the time triads isolate real performance between closely or losely linked pairs, the backtested results illustrate here should be judged critically. The respective results are not adjusted for brokerage fees, bid-ask spreads, slippage and other execution related costs. Conservatively putting we are targeting 30% annualised spot returns. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Performance between assets are cyclical and ordered. In continuation of our work on TIME TRIADS and Econohistory, we introduce ALPHA INDIA. This is a trending product which carries signal based on performance cycles of Indian market pairs. This is a part of the time triads analytics developed by Orpheus Research. We are also working on some anticipatory products linked with time projection, which will extend our analytics based offer.

Please feel free to mail us for any clarifications.

Enjoy the latest ALPHA.IND

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*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ECONOHISTORY research products.

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* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

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ORPHEUS INDIA RESEARCH

WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. 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, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

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Why do BANKS fall? This question may have many answers based on when you ask it. The question may have no meaning if it was asked at the market top at BSEBANK 12,678 (20 Jan 2008). It may evoke a shrug if asked at Oct 2008 lows (BSEBANK 3,601). Now that BSEBANK has retraced almost 61.8% of the losses from historical highs (29 Jun 2009 8,575) the answer may at best be mixed.

Performance cycles on the other hand can give an answer at all times. BANKS can underperform NIFTY, means fall against NIFTY cyclically. For example NSEBANK fell against NIFTY three times since July 2007 for an average 140 days. If you zoom in a bit more coming from weekly to daily charts, the number of times NSEBANK underperformed NIFTY or fell against NIFTY increases by a factor of three to nine times with an average time period of 46 days. There is another interesting thing that happened during this time when BANKS were underperforming NIFTY, broad markets were falling or stagnating on all the three occasions. What does this mean? This means that if we study performance cycles (TIME FRACTALS) we can not only isolate performers but we can also understand when the broad market might be ready to turn.

NSEBANK seems ready to underperform again against NIFTY. Empirically this means that chances of a broad market stagnation or negativity might be in. We have illustrated here the pair performance cycles (INTERMEDIATE and MINOR) between NIFTY and NSEBANK. Both time frames suggest an impending cycle low which could mean the end of NIFTY’s underperformance against banks. A clear turn from respective lows should see NSEBANK underperforming NIFTY for more than a few months. This also means that LONG NIFTY– SHORT NSEBANK could be an interesting pair to watch for the next 140 or 40 days. Now 140 days is a long time which takes us well into the final quarter of 2010.

Financials react fast to economic changes and hence carry clues for market perspective. This validates our overall negative view on the Indian market, which would be challenged only if prices move above the highlighted key resistances. We have carried Elliott updates on the main indices and ANTICIPATED AND HAPPENED cases on BSE REALTY and BSE POWER.

Enjoy the latest WAVES.INDIA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Login for orpheus.asia member’s area here.

ORPHEUS INDIA RESEARCH

WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. 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, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

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There are stories about the inverse correlation between SENSEX and the US Dollar Index (USD). The same stories which talk about inverse correlation can also explain perfect correlation, but there is something missing here. First, perfect correlation does not last. Second, if instead of absolute prices if we compare changes between prices, the idea of correlation adorns a new meaning. For us at Orpheus it is not about positive or negative correlation, it is about the cycle of correlation.

The question of when DOLLAR strengthening against SENSEX will start or vice versa is more important than the obvious fact that dollar strengthening affects Sensex inversely. SENSEX pushed 17% higher in dollar terms compared to INR. This was a result of INR weakness against the dollar that was reflected in SENSEX returns.

According to performance cycles, an asset will always outperform or underperform the other asset. This means that there will always be an inverse correlation between any pair of assets if you are comparing performances. So what matters is really not correlation, but which of the assets is outperforming the other and WHEN.

In continuation of the above view we continue to look lower on SENSEX. The current downmove looks like an impulse which should push prices back till open gap levels.

We highlighted a Head and Shoulders pattern on SENSEX and Double Top pattern on NIFTY and BSE OIL. The current report also carries ANTICIPATED AND HAPPENED cases on NIFTY, CNXIT and BSE REALTY, as well as time oscillators updates. Our overall Indian market view remains negative.

Enjoy the latest WAVES.INDIA

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

ORPHEUS INDIA RESEARCH WAVES.IND is a perspective product published on Tuesday and Thursday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. 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, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

COVERAGE: REUTERS RICS. INDICES. .BSEBANK, .BSEOIL, .NSEI, .BSECG, .BSESN, .BSEAUTO, .CNXIT, .NSEBANK, CITc1, IFc1, .NSEBANK

ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS – USA