The Full-Scale Game Between Market and Policy Unfolds

2007/8/28 16:10:20

Today's market is technically very simple—it's exactly the oscillation of the 1-minute hub that this ID described yesterday. To form a new upward attack, we need to see whether a third-type buy point forms for this 1-minute hub. Then, most crucially, since the trend starting from point 49 is already a standard 1-minute uptrend, the signal for this uptrend's end would be divergence. Therefore, whether the divergence segment can be precisely identified and ultimately form divergence is the key to the coming days' movements. Moreover, whether this 1-minute divergence triggers the precise identification of a divergence segment at an even larger level is the most critical question for the weeks ahead.

From the fundamental perspective, the full-scale game between market and policy has already unfolded. Some things—those that can't be said or shouldn't be said—I won't say. What can be said is that currently some latecoming funds and certain legitimate funds using "market-value marketing" as a cover are playing a dangerous game. The name of this game is: gambling against policy.

Clearly, at least in their view, there is room to gamble against policy right now. First, an extremely important meeting will convene shortly, and they believe regulatory oversight may have gaps during this period. Second, the current blue-chip rally will ultimately be backstopped by index futures. Third, H-shares, red chips, and A-shares can be played against each other—this two-way promotion means winning on both sides. High A-share valuations give H-shares and red chips room, and when the latter rise, it gives the former a reason to rise further. (Of course, this ID agrees with this point and is happy about it—why else would this ID be fond of the "China-prefix" stocks? Today, even one of the laziest China-prefix names, China Life, started moving. This ID is quite satisfied.) Fourth, some reasons can only be understood implicitly, not spelled out.

As for the regulatory side, there is indeed a dilemma. If hard regulation is deployed, it falls back into the predicament of May 30th and its ilk. But soft regulation is scorned by the market for its insufficient force, failing to achieve its objectives. So the regulators sometimes have no choice—it's just that certain bottom lines must not be breached. Once breached, from an objective standpoint, this ID believes hard regulation can be forgiven.

Now, resolving this standoff through the market's so-called rationality is unrealistic. The market has never been rational. Moreover, certain funds, to put it bluntly, are spending other people's money—they don't feel the pain. As long as they can exploit the unspoken rules, what won't they do? So don't pin hopes on market rationality. The ultimate outcome is simply one of two:

One: The market, due to certain factors, voluntarily refrains from touching certain bottom lines. For example, if America's mess generates a second wave, then the whole world naturally follows it down, and the deadlock can be naturally resolved.

Two: The market doubles down and ultimately touches certain bottom lines. Some situations may even arise only because someone guaranteed or pleaded on their behalf. When you're given face and refuse to accept it, the only possible outcome is a falling-out—and who can you blame for that?

In a certain sense, the massive increase in transaction costs for everyone now is precisely the result of being given face and refusing to accept it. Now, although the index has come back up, the consequences of this massive increase in transaction costs cannot be changed for the foreseeable future, and ultimately it damages the entire market.

Now, proposals like halving the stamp duty can't even be brought up. Those who originally wanted to submit such proposals are too embarrassed to do so now. This excessively high stamp duty is the collective karma of all participants in China's capital market—this is called reaping what you sow. So, how much more is waiting on the horizon?

This ID made the current situation crystal clear long ago: those who wanted to destroy the market at 3,600 points, those who were in a state of panic at 3,600 points, would start getting excited after a rally of N-ty percent, start boasting about their brilliant foresight. Now, at 5,200 points, this has become reality. Especially, some who were die-hard bears from 1,000-something points switching to bulls further proves that things have reached a level requiring vigilance.

This ID is fundamentally concerned only with the integrity and rationality of market structure. What this ID least wants to see is market structure being intentionally or unintentionally damaged. Damage to the market ultimately gets passed on to all market participants.

Just as this ID intervened when things were at their worst at 3,600 points, when the market develops to a point of total loss of control, this ID will likewise intervene. This ID has the ability to catch a boulder out of thin air at 3,600 points, and naturally has the ability to do other work too. When this ID does things, it's always done openly and explicitly. Before Spring Festival and at 3,600 points, it's already written in the candlestick charts—this ID doesn't need to explain or prove anything.

This ID has only one objective: to hope that this ID can create a component force that prevents the market from touching certain bottom lines, thereby preventing things like the stamp duty that so damage the market from becoming reality.

Some things are useless to say more about. When it's time to act, just act—this ID has that right.

This ID can put it even more plainly: any activity related to the 2/3 line, this ID can accept. Any activity that attempts to rapidly break away from the 3/4 line to create a bull trap, this ID cannot accept. Clear enough?

Enough said. Signing off first, goodbye.