Pullback After Breakout — Tomorrow and the Day After Are Key

2007/12/4 15:29:26

Today the market pushed a bit harder, breaking through the upper rail of the descending channel from 6,004 points, but was blocked by the 10-day moving average. However, the subsequent pullback didn't fall back below the upper rail, so for now it's still an acceptable situation. Generally speaking, a breakout needs 3 days for confirmation, so tomorrow and the day after are the key.

Actually, the reason the market was so hesitant today is that the economic conference that started yesterday hasn't yielded any definitive conclusions yet. To push forcefully now, only to have something unwelcome emerge from the conference — wouldn't that be asking for trouble? So taking some time with the breakout-and-pullback here isn't too bad a thing.

The spirit of this conference will become clear very soon, and it will determine the short-term market trend. But regardless of the conclusion, it will ultimately create a major counter-rally against the first wave decline from 6,124 points — this conclusion is certain. The only difference is, as mentioned yesterday, whether there will be a bear trap first.

Since current volume is too low and the market's own combined force is too weak, news has an especially amplified effect at times like this. So if you want to make particularly fine-grained judgments about the trend, you cannot ignore the impact of this conference's news. But if you only need to know the broad directional picture, then there's no need to pay too much attention to this conference — even if there's something special, it merely creates an additional bear trap.

The ultimate confirmation of the market's major counter-rally will be marked by the 10-day moving average being firmly held.

On individual stocks, many low-to-mid-priced stocks have started making moves, so the index's significance is limited. However, once the index launches, be careful of another 9119-style whipsaw.

The characterization of this counter-rally has been very clear all along — it's a counter-rally, after which there needs to be a second bottom test to confirm the bottom. Of course, if this time there's first another bear trap before the rally, then the next confirmation test doesn't necessarily need to break below the bottom, as it could form a so-called double bottom. Otherwise, breaking below the bottom wouldn't be too strange.

Heading out first. Goodbye.