The Battle for 5555 Points

2007/11/6 15:37:47

Today's movement was a battle for 5555 points. Typically, in such a battle, the outcome takes at least 3 days to determine, with a 3% buffer zone above and below. What's 5555 × 97%? Calculate it yourself.

Of course, this decline is different from the last one—most people didn't feel much, because what dropped this time were the China-prefix stocks, while the other 90% barely fell. But that doesn't mean the potential risk is smaller. If the neckline truly breaks, many stocks that rallied during the China-prefix decline will also retest their lows.

So for the bulls, the battle for 5555 points is one they cannot afford to lose. The bears, on the other hand, don't really care—they still have the 6000- and 6100-point defense lines behind them. Actually, from this ID's bearish standpoint, this ID would rather not see the neckline break this easily, because the force would be limited and it would likely just be a fake breakdown.

For the bears, the breakthrough of the neckline must be lethal. In this ID's theoretical terms, it must be a third-type sell point followed by a downward hub shift, not some boring larger hub formation—that would lack killing power. To achieve that kind of force, you need to grind repeatedly at the neckline. If it fails to break through after another attempt, another group of people loses hope, then another attempt—repeated disappointment is what creates real killing power.

Both bulls and bears are mostly pigheaded, all eager for quick gains. This ID is just one component of the force. Whether things ultimately unfold as this ID hopes—with maximum killing power—is not something this ID alone can decide. Moreover, it's very possible that some short-sighted bears, eager to quickly break the neckline, end up walking right into a bull trap instead.

This ID's attention has mostly shifted to PE lately—no mood or time to call up small meetings for coordination. So the bears can do whatever they want. If this ID has time, it'd be better spent creating another N Western Mining-type deals to sell to the bulls—buying at 1 yuan and eventually selling for tens or even hundreds. Feels pretty good.

PetroChina today traced out a line-segment decline. This morning's rebound to 41.2 was essentially a pseudo-third-type sell point for the pseudo-hub above 41.7, then the decline continued. Now watch for the line-segment divergence in this downward move. Once it appears, there'll be at least a larger-level rebound—bigger than yesterday's end-of-day line-segment rebound, at minimum one that allows a T+1 operation. As mentioned yesterday, some line-segment rebounds may not actually generate T+1 profit—today was an example. PetroChina's ultimate trajectory will very likely be similar to China Life Insurance—also mentioned yesterday. Of course, it can't be an exact copy, but the basic pattern will probably be similar.

The above discussion of how to maximize killing power probably offends quite a few people, but the market is what it is—if you want to be sentimental, don't play the market. This ID is merely exposing the potentially brutal side of the market. Sometimes this ID doesn't have time to act on it, but that doesn't mean nobody else does.

If you develop sufficient insight into the market, then no one's tricks will work on you. That's what matters most.

What the market requires is wisdom, not emotional manipulation.

Know yourself. Stay calm, and then calmer still.

Signing off, goodbye.