Some Markets Demand That You Buck the Trend

2007/7/4 15:45:01

Most retail investors are fence-sitters. But if all Chinese people became fence-sitters, then the day China's financial markets get slaughtered wouldn't be far off. As I said yesterday, those currently waiting for quota allocations all hope for a sideways range. Below 3000, this ID also went against the tide once — the blog partially documented it at the time. That time, these traitors and the current crew waiting for quotas hoped for a big pullback from below 3000 all the way down to below 2000 for a massive swing trade, but ultimately they didn't succeed. Look at posts here from around Chinese New Year, and you'll see how intense the struggle was.

This time, the logic is the same. Those waiting for quotas hope their newly increased allocations can buy stocks at what they consider "investment-grade" prices. Their domestic accomplices and those tagging along are all secretly sabotaging — as I explained in yesterday's commentary. At times like this, someone must stand up, just as around Chinese New Year below 3000-point level, when that old man Luo was spouting American nonsense, someone had to stand up. That time, this ID stood up. This time is the same. The current battle is about not letting the traitors and quota-waiters get their way. At 3000, the traitors and quota-waiters suffered a major defeat. This time, conditions are harsher, but some things must be done. Just like at 3000, this ID said: some things can only be done by Beijing people. Beijing people are just that badass — like yesterday, singing The Internationale in the Great Hall of the People.

Technically, the resistance is immense, but some things you just have to do against the trend. This morning, two waves of assault had absolutely no one following — all retail investors fled in panic. The traitors and quota-waiters kept sabotaging — look at today's Sinopec and other index heavyweights, and look at how the white line representing heavyweight stocks stayed below the yellow line all day. But this time, the traitors and quota-waiters came up empty again. The index did fall, but today's guerrilla tactics were still successful.

Now the strategy is to abandon the index and conduct strategic position-building in all stocks with medium-to-long-term value. Let the traitors and quota-waiters — even if they really succeed in building a sideways range — find no good stocks to buy. Whole-company listings, major restructurings, small- and mid-cap growth stocks — these are all guerrilla warfare domains. Let the traitors hammer the index heavyweights all they want. We're not refusing to touch heavyweights — we're just waiting for the right moment. When it comes, guerrilla warfare transforms into large-scale army operations, just as this ID demonstrated with China Unicom and Bank of China at 3000.

For retail investors, your money is for putting food on the table. There's no need to insist on staying in such a bloody battle. It's like the eight-year War of Resistance — in Shanghai, weren't there plenty of kept men and women who lived perfectly well? When the war of resistance is won, don't you still get a share of the spoils? In this world, besides being a traitor, you can also be a compliant citizen — doesn't matter if it's the Japanese or the Americans. But this ID cannot do that. No true Beijing person can. This ID simply cannot stand by and watch traitors and quota-waiting invaders get their way. This ID's money isn't for spending — it's for buying bullets to shoot the invaders and traitors.

What's so scary about the current environment? In 1995, under conditions far more brutal, a vigorous restructuring-led rally was still launched. And the stocks leading the charge — do you still remember where they were from? Yesterday, The Internationale could ring out in the Great Hall of the People, and amid the most treacherous market conditions, the Song of the Guerrillas can also ring out.

There's not much to say technically. The neckline can't break through on heavy volume, so the pattern is naturally damaged. The worst-case scenario for the market is entering a period of shrinking-volume slow decline. This ID has given retail investors the counterstrategy many times: if you lack the technique and the capital strength, then go half-position or even empty and play the compliant citizen — wait for the war of resistance to be won, then come back out.

For capital with some heft, pick your targets. There are only about 1,000 stocks in the market — doesn't China have at least 1,000 guerrilla units conducting guerrilla warfare on every suitable stock? This ID has already selected targets. What about you?

Alright, enough said. Those without capital strength — just follow the technical signals. The only reminder worth repeating is: expand your operating time-frame, especially those whose technique isn't so great.

But give this ID one opening, and a counteroffensive is inevitable. Wearing down the traitors and invaders through attrition — that's the strategy.

Signing off first. There's still a pile of things waiting. Can't say more. Goodbye.