Sensationalizing the Crude

Victor Niederhoffer, published an article that sought to establish whether days with news of significant world events corresponded to days that saw big price movements. He tabulated all very large headlines in The New York Times from 1950-1966. Out of the 432 significant world event days, 78 (18 per cent) showed big price increases and 56 (13 per cent) showed big decreases.
Even if all statistical evidence piles against information, 90% of humans would still believe the news. Why is that? Counter intuitive strategies are not for the majority, herding is easy, abandoning cause and effect for a seasonality is rare. The very reason that majority of humans love momentum and are trend followers is the reason why even a scientific approach on seasonality is for the few. Now the good part. This lack of popularity is one reason why cycle indicators will continue to work and second, minority means risk mitigation. It’s the trend follower who is more prone to a risk trap because he(she) spends more time training to ride the trend rather than spotting a reversal. The other thing about following counter intuitive cycles is that they force you to correct behavioural errors. Most of behavioural finance errors happen to the trend following herders.
Yesterday, the ‘Oil to get costly’ was all over Indian news channel. There were tails at gas stations. The sensationalizing of crude worked. However, coming to look at it, it’s the INR denominated crude that is at a historical high and not the dollar denominated crude. Rather the dollar denominated gasoline has already corrected 10% from the recent high at 127. The structure looks negative and we think crude should correct more. Regarding INR, we continue to look at a bottoming NIFTY in conjunction with a topping INR ready for a reversal. The majority it seems is getting ahead of itself sensationalizing the crash of rupee and everything Indian. We wait for the inflexion signals.
In this latest report we have analyzed pairs of Indian sector Indices and stocks against Gasoline. The aim is to look for reversals before the trend happens. This is not a sensational approach, but it is low risk strategy of generating Alpha.
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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.
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