The Spearman Indicator For Technical Analysis

Technical analysis can be considered both a science and an art; patterns and chart reading represent the artistic component, while technical indicators help us analytically understand trend strength, buy/sell pressure, and divergences. There are perhaps thousands of technical indicators, but few seem to deliver real analytical power and differentiation in this increasingly crowded landscape, especially since many can be perceived simply as intellectual exercises that produce little bottom-line impact.

To narrow down this set of tools, statistics offer a great source of established knowledge for those who want to focus on more tangible and useful indicators. For instance, the tried-and-tested Z-score has become a classic in both statistics and technical analysis.

In this article we will discuss an established concept in statistics originally proposed in 1904, with potential for use in technical analysis: the Spearman’s rank correlation coefficient, also known as the Spearman indicator.

Spearman’s rank correlation coefficient
Charles Spearman was a late 19^th-century and early 20^th-century British psychologist and mathematician with major contributions to factor analysis, theories of intelligence, and mental test theory. In 1904, he developed a statistical measure for the strength of association between two variables. It later became the foundation of the rank correlation coefficient bearing his name. Spearman’s rank correlation coefficient computes the degree of correlation between the ranks of the elements in two data groups of equal size.

Now, let’s assume that two data groups are each composed of N elements (N = 10). The lowest-value element in each group receives the lowest ranking. Then the next-lowest element gets the second-lowest ranking, then the next, until we reach the highest element in each group that gets the highest ranking. After this exercise, we are left with the original two data groups and two additional groups containing the ranks.

FIGURE 1: QSTICK ON A MONTHLY S&P 500 CHART.Positive values confirm buying pressure as seen during the 2003–07 solid uptrend. Things changed dramatically during 2007–09 when Qstick turned negative.

Cabinet reshuffle likely this week

The Prime Minister has already had meetings with President Pratibha Patil and Congress supremo Sonia Gandhi on the subject. Prime Minister Dr. Manmohan Singh is shortly going to make changes to its council of ministers and the political atmosphere in New Delhi is heating up with a lot of conjecture. The Prime Minister has already had meetings with President Pratibha Patil and Congress supremo Sonia Gandhi on the subject. A formal announcement could come on January 19. If for some reason the same does not take place on January 19, it is expected by the end of this week. Changes in the Union Cabinet are likely to be restricted to filling up of three berths besides minor tinkering with four-five ministries. Two of the vacancies were caused by the controversial exits of A. Raja and Shashi Tharoor while the third one was left vacant after Prithviraj Chavan was named the Maharashtra Chief Minister. Kapil Sibal may be given the full charge of the Telecom Ministry and Law Minister Veerappa Moily could be named the new HRD Minister. The Congress heavyweights - Pranab Mukherjee, A.K. Antony, P. Chidambaram and S.M. Krishna, are likely to retain their respective posts. DMK and Trinamool Congress may get a berth each, according to reports. Meanwhile, Sonia Gandhi met the Prime Minister today amid speculation that a reshuffle of the Union Cabinet is on the cards later this week. Gandhi met Dr. Singh at his residence. She was accompanied by her political secretary Ahmed Patel. The meeting came a day after the Prime Minister met the President. Source: http://www.indiainfoline.com/Markets/News/Cabinet-reshuffle-likely-this-week-reports/5055259979

No merger of Ispat with JSW, Mittals to continue on board

The Mittal brothers, Promod and Vinod Mittal, the promoter directors of Ispat Industries would continue on the board even after majority interest in the company goes to JSW Steel.

"Both Promod and I would continue on the board as non-executive directors," Executive Vice-Chairman Vinod Mittal said here today on the sidelines of EGM to seek shareholders approval for allotment of 45 per cent stake in the company to JSW Steel.

The Mittals would not participate in the open offer as they are not keen to reduce their holding in the company, he said.

Ispat Executive Director Anil Sureka said out of the fresh equity of Rs 2,157 crore infusion, around Rs 600 crore would be utilised to reduce the existing debt of Rs 6,500 crore till September 2011 and rest Rs 5,900 crore would be refinanced.

"Another Rs 600 crore would be utilised to meet financing of the ongoing projects and the rest around Rs 950 crore would be meant for working capital," he said.

Ispat would get an annual interest outgo benefit of around Rs 300 crore with fresh capital infusion of the strategic partner.

Mittal said the board strength has gone up to 15 with induction of JSW Steel Vice-Chairman and Managing Director Sajjan Jindal and Joint Managing Director and CFO Seshagiri Rao and two other independent directors in the company.

"JSW has option to increase their strength on board and it can be recasted three months later," he said.

Mittals, will hold 21.07 per cent in the company post prefernce allotment to JSW Steel.

"Its a professional decision," Mittal told shareholders when asked why LN Mittal group was not inducted to keep the company within the Mittal family.

He also declined to speak on LN Mittal group''s role, if any, as a strategic partner in the company.

Meanwhile, Mittal said the ongoing projects will begin in the next six months and would be completed in the next 24 months.

SEBI bars Anil Ambani from stock investing

The Securities and Exchange Board of India (SEBI) on Friday said billionaire Anil Ambani cannot invest in publicly-listed securities until the end of this year, and barred two of his companies from such investments until the end of 2012.

SEBI said Reliance Infrastructure and Reliance Natural Resources, which has since been merged into Reliance Power, had used money raised through overseas borrowing and foreign bonds to invest in the stock market.

The regulator said its investigations found Ambani's Reliance Infra and Reliance Natural Resources were "responsible for misrepresenting the nature of investments in 'yield management certificates/deposits' and the profits and losses thereof," in their annual reports for the years ending in March 2007, 2008 and 2009.

The regulator said it had issued "show cause" notices to the companies and the executives in June 2010.

Reliance Infra said in a statement it had voluntarily settled the matter with the regulator, with no admission or denial of guilt. It said its directors had paid the entire settlement fee of 250 million rupees ($5.5 million).

Anil Ambani, one of the formerly feuding billionaire brothers and one of the most influential businessman in India, leads the Anil Dhirubhai Ambani Group conglomerate, some of whose companies are burdened with heavy debt loads.

Ambani's Reliance Communications, which is India's second-largest mobile phone carrier, alone had net debt of 291.9 billion rupees ($6.4 billion) at the end of September .

Ambani, ranked as the world's 36th richest man by Forbes in 2010, failed in efforts last year to raise funds for the telecom company by selling a 26 percent stake and merging its tower arm with a rival.

"I don't think there will be any financial impact, since they have not been barred from the primary market," said Neeraj Dewan, director at Quantum Securities, adding there would be a "sentiment setback" on the companies in the short term.

"If they need to raise funds, it should not be a problem, they can raise it from the primary market," he said.

SEBI said four other directors in Reliance Infrastructure were also barred from stock investments until December.

(Additional reporting by Tanmaya Nanda; Editing by Jui Chakravorty and Tony Munroe)

Source:http://in.finance.yahoo.com/news/SEBI-bars-Anil-Ambani-stock-reuters-929442773.html