5032 Conquered, Initial Mission Accomplished.

2007/12/20 15:15:02

Because I have a business trip tonight, I'll write the evening post about next year's market outlook shortly — it'll be posted around 4 o'clock. I'll try to do the closing commentary tomorrow. If there's no time, I'll make it up on Saturday or Sunday.

Today the broader market conquered 5032 points — the initial mission is accomplished. The overall pattern of the market oscillating around 5000 points remains intact. The next step is to hold 5032 firmly, laying the groundwork for the further mission of attacking the 5209-point neckline. Therefore, whether 5032 can be held is the critical level for judging the market's ultra-short-term strength.

Today's intraday price action demonstrated the importance of the 5032 level beyond any doubt. The entire afternoon was basically a process of accumulating strength, breaking through, and pulling back to confirm around that level. Many people still don't know how to read the market. Take today's price action for example — there was absolutely nothing to worry about, because the entire day didn't even complete a single line segment. What is there to worry about?

From the 4812-point move up, there's a 1-minute hub in the vicinity of 4920. So the next step is to wait for the emergence of a second 1-minute hub to see whether this 1-minute upward move is confirmed, and finally to watch for the appearance of its top divergence. This is exactly the same as the 1-minute decline from 5209, just in reverse.

PetroChina finally constructed its bottom fractal today — what follows is just the confirmation process. On the 30-minute chart, the near-divergence of this line segment is clearly the key behind this rebound. This also shows that PetroChina can at least form a larger-level hub around the 30-yuan level. Whether it subsequently breaks down again or continues to rise will depend on the third-type buy/sell point of this hub.

The broader market is slightly stronger than PetroChina. The extension of the upward stroke has already begun, so like the 5209 situation last time, wait until a top fractal appears before acting. Of course, if you know how to read the divergence of a 1-minute upward move, you can operate directly on that divergence — which would be more precise.

Today's surge in large-cap stocks was related to so-called futures rumors, because a certain department reportedly submitted some documents requesting the launch of futures. But such things require approval. Right now, who has time for that? Who's responsible for approving it? Procedurally, this isn't something that can be approved with just one person's signature. As long as even one person with signing authority has reservations, this thing will likely go through a protracted process.

Actually, this ID welcomes such wrangling. China's capital market right now hasn't even graduated from elementary school — the spot market isn't even sorted out yet — and they want to launch futures and go to university? Whoever has the biggest head and thickest neck, go ahead and push for it. If it actually comes out, this ID will happily watch the comedy unfold.

First, please get the ChiNext board right and complete the framework of a multi-tiered capital market. The most shameless are those interest groups trying to rush through the gate before year-end for their own benefit.

The biggest issues facing China's capital market right now are the framework of a multi-tiered capital market and the rationalization of transaction costs like stamp duty — not the pie-in-the-sky notion of index futures. (This idiom was written incorrectly by officially released software — even getting idioms wrong and still getting published, who's responsible for that? Let's hope our futures aren't at this level of quality.)

Signing off now. The 2008 market outlook will be posted at 4 o'clock.