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The Chairman
Victor Niederhoffer

12/19/04
Thoughts on Relative Health in Asia vs. US, by Victor Niederhoffer

1. The 3 percent up move last week in Nikkei from 10756 to 11078 while the S&P showed a lackluster 0.5 percent rise is the kind of divergence that leads one to speculate upon the gravitational influence of one market on another, or push pull what have you.

2. The Nikkei was up 2 percent or more in a week, 37 times from 2003 to 2004, and the change in the S&P the next week was up an average of 1/10 of 1 percent. Thus, there was no follow through from one unconditional on the other.

3. On the nineteen occasions when the Nikkei was up more than 2 percent more than the S&P, the average change in S&P the next week was close to zero. Thus, no conditional superior performance from the Nikkei.

4. The longest interval during which the Nikkei didn't go up at least 2 percent was 5 weeks. The hazard ratio for a rise of 2 percent or more seems to be about 1/2 when there has been 3 weeks without such a rise versus its 35% norm and this appears non-random.

5. The relative perturbations in markets such as this, augmented by the currency moves between the two and perhaps the comparable European moves would seem to provide a nice kind of living for an industrious sole.

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