Hot Spots Spreading Into a Rising Tide
2007/8/21 15:59:25
Of course, for those who can't stand it—the bears who have been declaring since 1,000 points that the earth would be destroyed, the world would end, and that the Shanghai stock market has no value even at 100 points—this title is too rosy, just designed to trick retail investors. Where are these so-called hot spots? It's just market manipulators pumping to dump. Unfortunately, these manipulators have been pumping from 1,000 points for over two years, 4,000 points, and they're still pumping, still tricking retail investors. Who knows what to even call this anymore?
The logical framework here is very clear. Before total market capitalization surpassed GDP, this ID never discussed any issue related to bubbles. It was only starting around last week that this ID began discussing this topic and gave a clear definition for future movements: bubble-mode survival. If the journey from the severely undervalued state at 1,000 points to just reaching GDP last week took two years, then may I ask: from manufacturing the bubble to the bubble actually bursting, how long should that take at minimum?
So if you don't have a grasp of the overall big-picture direction and are forever tormenting yourself in daily fluctuations, or every day hoping for a crash, a bear market, 100 points, another 1,000 points—that's way too much water on the brain. This ID has already given a definitive assessment of such people before: these people, even when it really drops, it has nothing to do with them. Even if there is a bear market, the real bottom has nothing to do with them. Even if there's a major correction, it has nothing to do with them. 1,000 points had nothing to do with them, 3,400 points had nothing to do with them, and 3,600 points equally has nothing to do with them.
Let's return to today's price action. Right now, the very clear phenomenon is that hot spots are spreading. This ID previously mentioned that after mid-year reports come out, second and third-tier stocks would gradually become active. By the end of this month, the mid-year reports will basically all be out, and those stocks with poor earnings but good themes can shed the shackles of earnings and gradually become active.
Actually, this rhythm is nothing new. It's always been the case that when earnings are being massively reported, those with so-called good earnings—first-tier stocks—perform relatively better. Once earnings reports are all done and earnings as a theme have been played out, naturally new themes must be found to replace them; otherwise, you can't maintain the heat in this pot. Of course, this year is a bit exceptional: even after earnings reports are done, first-tier components won't droop too much. Why? It's all because of those futures dangling ahead of everyone. With that thing shimmering in front of them, first-tier component stocks—those big dogs and small dogs—will inevitably hop and frolic from time to time.
Among today's limit-up stocks, second and third-tier names already account for the vast majority—this is a normal phenomenon of hot spots spreading. If this fire can persist for a few more days, it will completely become a prairie blaze.
Today I won't post a chart—saving image upload space. Today's segmentation is also too simple, nothing special. As I said yesterday, technically speaking, what's needed now is first the formation of a 5-minute third-type buy point, then a 30-minute third-type buy point. Only then can the breakout be ultimately confirmed as valid. Before that, everything can only be viewed as hub oscillation.
The gap left today constitutes a short-term technical key point, while the real resistance above isn't 5,000 points but rather the 2/3 line, currently at 5,089 points. This was previously communicated to everyone in the form of a question. After breaking through the 1/2 line, the next one up is the 2/3 line. This involves prediction, and there's a fairly high empirical probability behind it, but since this ID is committed to thoroughly opposing prediction, it was mentioned only in question form—precisely to prevent everyone from having preconceptions that would affect real-time judgment, which is the real skill.
Prediction is something that merely follows a template by rote—it's fool's work. After 2/3 comes the 3/4 line—where that currently sits, even a fool can figure it out. So prediction is all fool's work—let's not bring it up.
Today I can answer questions until 5 o'clock.
Replies
缠中说禅 2007/8/21 16:27:28
Stone Monkey Delete all comments by this person
2007-08-21 16:09:23
Question: Closed or not closed?
Lesson 67 states: Emphasis—in the second situation, the latter characteristic sequence does not necessarily close the gap of the corresponding former characteristic sequence. Moreover, in the second sequence, for the formation of a fractal, regardless of the first or second situation, as long as there is a fractal, it counts.
Lesson 71 states: The logical relationship here is very clear. For a line segment to be destroyed by a stroke, the gap of its last characteristic sequence must be closed; otherwise, there is no case of destruction by stroke.
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This is not a problem at all. Line segment destruction and line segment stroke-destruction are two entirely different concepts. A line segment being stroke-destroyed does not mean the line segment is necessarily destroyed. In other words, a line segment being stroke-destroyed, with the characteristic sequence gap being closed, does not mean the line segment is necessarily destroyed, with a new line segment emerging.
Line segment destruction falls into those two situations.
Among them, the second situation includes one most special case—the so-called small-level-to-large-level transition where even the last characteristic sequence gap is never filled.
缠中说禅 2007/8/21 16:33:43
[Anonymous] Night雨 Delete all comments by this person
2007-08-21 16:27:32
Hello Sister, thank you for yesterday's Analerta commentary—it nourishes our souls. We must first develop real ability before discussing whether we're gentlemen or petty men; both require skill. Connecting to the present, too many people think that just saying nice things makes them good people, while actually doing confused things—they can't even qualify as petty men, only as hypocrites. The difference between petty men and gentlemen lies in the direction of the heart, and their future achievements will also differ greatly.
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Correct. First become a "person," then there can be a petty person; with petty persons, then there can be gentlemen. If one can't even become a "person," then one is merely a "pseudo-person"—a fake person, a puppet being manipulated.
The difference between petty men and gentlemen, more precisely, lies in the magnitude of the heart's capacity—this also includes the direction of the heart.
缠中说禅 2007/8/21 16:36:36
[Anonymous] Happysky Delete all comments by this person
2007-08-21 16:14:11
Been lurking for a long time, popping up for a moment
Thank you, blog host, for the daily market analysis. From your articles, I feel your theory is very effective, but I just can't learn it.
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Actually, logical things are the easiest to learn. The key is to start from the most basic concepts, then string together the entire chain of logical relationships—this way, understanding one part unlocks everything. Otherwise, it can only become a mess.
缠中说禅 2007/8/21 16:40:58
[Anonymous] Sina User Delete all comments by this person
2007-08-21 16:30:33
I increasingly feel your theory is far more useful than some other theories I've read. However, I still can't master it well. Recently I've been trying to reduce my cost to zero, but I keep losing my shares. How frustrating.
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Increase your operational level. For beginners, first practice holding stocks—buy at a major-level buy point and hold until a major-level sell point. At minimum, this should be 30-minute level or above. Look at this rally from 3,600: it has never effectively broken below the 5-day moving average. For beginners, just this one trick alone puts you above all so-called experts. For those with larger capital, watch the 5-week moving average.
As for short-term trading within hub oscillations, that's a highly difficult activity—beginners naturally can't do it well. During trends, there's simply no possibility of trading for price differences. During a trend, the only thing to do is wait for divergence. Note: everything above is in the context of your operational level.
缠中说禅 2007/8/21 16:44:22
Stone Monkey Delete all comments by this person
2007-08-21 16:31:47
Lesson 71:
The classification of line segments into two situations—clearly, distinguishing which situation applies is critical for delineating line segments. Actually, the issue was already explained very clearly there. The criterion is only one: between the first and second elements of the fractal in the characteristic sequence, there does not exist a gap in the characteristic sequence.
Isn't this last sentence missing a character?
Between the first and second elements "does" or "does not" exist a gap in the characteristic sequence.
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If the original text reads that way, then yes, a character is missing. Thanks—I'll look at it in a moment and correct it.
缠中说禅 2007/8/21 16:46:44
Happy vs Veggie Bug Delete all comments by this person
2007-08-21 16:30:58
In fact, if you use the new precise definition from Lesson 67, the segmentation of 3-4 in Lesson 57 can be readily resolved. It's precisely the sentence "Emphasis—in the second situation, the latter characteristic sequence does not necessarily close the gap of the corresponding former characteristic sequence" that resolves this problem. Sister Chan, is this correct? Should the "small-level-to-large-level transition" now take a back seat???
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At the line segment level, the concept of small-level-to-large-level transition is not needed. But above the smallest-level trend type, it's still needed.
缠中说禅 2007/8/21 16:50:02
[Anonymous] Sina User Delete all comments by this person
2007-08-21 16:45:08
Blog host, could you talk about how the steel sector will develop going forward? Thank you!!!!!!!!
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The development of any sector basically follows a one-two-three rhythm.
缠中说禅 2007/8/21 17:02:26
Regarding Stone Monkey's question, since it's representative, let me add a few more words:
Stroke destruction and line segment destruction are two non-overlapping concepts. Stroke destruction does not necessarily mean line segment destruction, nor does line segment destruction necessarily require stroke destruction.
Obviously, in the first situation of line segment destruction, there is necessarily stroke destruction.
In the second situation of line segment destruction, that's not necessarily the case.
Conversely, if line segment destruction occurs without stroke destruction, then it must be the second situation.
Then why is stroke destruction singled out separately? Because stroke destruction has significance in dynamics.
Part of this ID's theory is somewhat similar to physics—it explores aspects of dynamics. In this regard, what everyone encounters most currently is divergence, and stroke destruction, like divergence, belongs to the realm of dynamics. This will be gradually discussed in the future.
First morphology, then dynamics—take it step by step, everyone.
Signing off, goodbye.
缠中说禅 2007/8/21 16:20:01
[Anonymous] 百思不解 Delete all comments by this person
2007-08-21 16:01:49
Hello Sister Chan!
Below is a question posted months ago that I still can't figure out. Could you explain in detail?
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I have a question about a theorem in Lesson 18. How should it be understood?
Theorem 3: The destruction of a "Chan-style trend hub" of a certain level occurs if and only if, after a sub-level trend leaves that "Chan-style trend hub," the subsequent sub-level pullback does not return into that "Chan-style trend hub." The two sub-level trends in this Theorem 3 can only combine in three ways: trend + consolidation, trend + counter-trend, consolidation + counter-trend.
Regarding the combination of two sub-level trends mentioned in Theorem 3, for example "trend + consolidation"—are these the same level? Is this about the connection of two same-level trends? Or from the perspective of trend combinations, is the consolidation hub a higher level than the trend hub?
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This relates to the associativity of connections. Simply put, as long as two sub-level trend segments can be decomposed, it works. The detailed situations will be covered in the next few lessons—please be patient. Tomorrow I'll continue discussing the issues of these different decompositions.
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Why must the consolidation hub necessarily be higher than the trend's? The key isn't whether it's consolidation or trend, but what level the hub actually is. Without hubs, without hub levels, how can there be consolidation, trend, or their levels?
This question has actually been addressed N times. The sign that consolidation ends is a third-type buy/sell point, while the sign that a trend ends is, after forming a divergence at that level, the pullback to the last hub. Why does a pullback definitely complete the trend? Because once there's a pullback, a larger-level hub definitely forms, so the trend at the original level is definitely destroyed. This logical chain is extremely rigorous.
Then, do we have to wait for the pullback to decide entry/exit? Of course you can—you can wait for the pullback and then the next upward move, operating at the so-called second-type buy/sell point. This type of operation can be done entirely without the concept of divergence, purely using the three types of buy/sell points.
Of course, in actual practice, you can use divergence and operate at the first-type buy/sell point. Why? Because after divergence there must be a pullback—this is a theorem of this ID's theory.
But from the analysis above, although the theorem that divergence necessarily leads to pullback is 100% valid, even without this theorem, this ID's theory still holds. Why? Because trends must complete. After a first-type buy/sell point comes a second-type buy/sell point—this is purely geometric, while divergence belongs to dynamics.