The Tech Divergence

Everything diverges. This includes the technology sector. The divergence is between intra and inter market basis. We have spent some time discussing the inter market divergence between CNXIT and the rest of the market (The CNXIT high). The respective articles illustrated how Infosys and TCS were top rankers and were set to underperform. We talked about this in Jan 2012 and almost 6 months down the year our broad tech view has delivered. Infosys is down while TCS is where it was at the start of the year. The rankings are still high and we still expect the majors to underperform. However, markets consist of a spectrum of performances and even if a sector is set to underperform, it’s components can deliver. It is this intra sector dynamics that creates sideways structures and market complexity.
Today we want to discuss the intra technology sector divergence. Unlike the top tech stocks viz. Infosys and TCS, the other technology stocks like A, B, C, D, E, F and G are not only low in performance rankings, but are also filtered long only India 30 ideas. These “other” technology stocks have a positive price structure and are accompanied by CNXIT and Infosys nearing multi year primary supports.
What does this mean? This means that not only the top tech performance overhang might be ready to ease, but this should boost the “other” tech components. Below we have illustrated the relative performance of Mindtree, HCL Tech, Hexaware vs. TCS. In all the cases the Intermarket ratio lines crossovers have turned positive. This means that the “other” stocks have started outperforming the tech major TCS. If the “other” technology stocks outperform, it suggests a positive bias for the market rather than otherwise. We have also carried a fundamental grid for the sector components along with the technical cases.
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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.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.

Michesan Anna-Maria, discovered her interest of markets immediately after completing her graduate studies in Economics. She followed it up with post graduate studies in corporate finance. A host of research work in behavioral finance, option strategies and quantifying market sentiment followed. Anna covers Indian equity and combines Elliott, Time Fractals and Time Analytics to deliver accuracy across time frames.