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.