Weight of Evidence

It’s the very nature of market to be excited. It feeds on excitement. Last week’s negative price action has got some Bear’s excited. But what is going to happen does not depend one day or a week or a month of negativity, but weight of evidence. Which means that more indications should point to a reversal than otherwise. Investors or traders should wait for a clear picture of a trend reversal because the goal is not to confuse a true reversal in the primary trend with a secondary trend or brief correction. Remember that a secondary trend is a move in the opposite direction of the primary trend that will not continue.
The last time we talked about role reversal. The respective support reversals still stand firm and are unbroken. We need a clear break at DOW 12,800 and S&P500 1,350 to look for some multi week negativity. Till then it’s all a negative excitement which is more potential than real.
Even if we look at the commodity trends, falling Crude and stagnating Gold continues to suggest reduced fear in the global markets. Above this the relative trend of Brazilian Bovespa seems to have bottomed against the Shanghai Index. The Chinese SSEC is at a historical 20 year underperformance low vs. Bovespa. Now this is one weight of evidence that suggests that China could outperform Brazilian Bovespa. If this is happening it is a big positive for the global equity and continued underperformance for commodity markets. The Indian market continues to reel under selling pressure falling below key 17,000 supports. On a retracement level this is still less that 50% fall of the upmove from start of the year. We continue to look at the ongoing down leg on India as a counter trend move which should bottom near current levels.
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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