A Regulatory and Control System Matching the Stage of Capital Market Development Must Be Established
2007/6/4 7:53:44
Last Friday, in the market commentary appended daily after 3 PM to that day's article Teaching You to Trade Stocks 57: Demonstrating Real-Time Chart Analysis Again, this ID clearly stated: "Starting Friday, public opinion will gradually shift, and a new round of reflection will begin," and "Over the weekend, in this situation, let the regulators clean up the mess. If they still enjoy this game of cracking down on one side then rushing in to rescue the market afterwards, then let them play." The development of public opinion over these past few days — especially Monday's articles with a unified tone across several major media outlets — have all proven this ID's judgment correct. Why could this ID make such a judgment? Simple — after dealing with regulators for over a decade, how could their temperament not be familiar? Of course, this ID also has so-called inside sources, but this ID's judgment preceded the information. Information, ultimately, is merely supplementary and confirmatory. However, this vivid example warrants deeper reflection.
Although this ID clearly pointed out in early May that "May is the 180th month since the 1429-point low — half of 360 — an extremely important and sensitive time window, after which something happening is clearly inevitable," and although 4341 points, representing 1800 points up from the February 6 low of 2541, inherently created strong technical correction pressure, a policy-driven market intervention like May 30 — repeating the same "policy market" approach of artificial market intervention that has been used for over a decade — is debatable. This once again demonstrates that a regulatory and control system matching the stage of capital market development has yet to be established. Without a mature regulatory and control system, without mature market administrators, there can be no truly mature market and market participants.
Setting aside how short-sighted it is to substantially increase investor transaction costs against the global trend of declining market transaction costs — and how much damage this will cause to the development of China's capital market — just consider the issuance of such an important policy change at an inappropriate time: its seriousness and prudence obviously require severe questioning. This involves deep-level issues about the relationship between administrators and investors. The two are not master and servant, not father and child, and certainly not mortal enemies. All market parties are ultimately market builders, equal before the law. Investors' illegal behavior should be severely punished, but the same applies to regulators. In a harmonious society, market administrators and investors should learn to coexist harmoniously — more communication, more understanding. Neither should treat the other as an adversary, much less set ambushes or carry out sneak attacks. This has nothing to do with one's personal trading results. Although this ID has never been harmed by such ambushes and sneak attacks, that's a matter of personal ability. The market as a whole has been ambushed and attacked — that is the real problem.
Even a good thing, if executed with the wrong methods and poorly timed, will backfire. Regulation and control — no matter how strict the measures taken against market violations and illegality — must have one fundamental bottom line: they must not damage investor confidence. Market administrators should be clear about their role as referees. They cannot artificially interfere with the course of the game, much less become participants in it. There must be no multi-headed management or policies coming from multiple doors. Any policy or public statement that affects the market must be coordinated, formulated, announced, and implemented by a unified authority. All policy formulation and announcement should follow standardized, transparent procedures to minimize non-systemic policy risk caused by human intervention. Regulation and control should be guided by a scientific development philosophy — absolutely avoiding emotional and short-term behavior. This is the greatest source of investor confidence. Otherwise, if the administrators' own behavior is emotional and short-term, how can investors be expected not to behave emotionally and short-termishly? Furthermore, regulation and control are fundamentally different. A mature market administrator necessarily emphasizes regulation while minimizing control — or even eliminating it entirely. A market dominated by control cannot become a mature market. How to gradually increase the proportion of regulation while curbing the impulse to control the market — this is the key to market administrators maturing.
The impact of China's capital market on social development will become increasingly profound. The existing regulatory and control system no longer meets the practical needs of China's capital market development. The most urgent priority is to establish a regulatory and control system that matches the stage of capital market development. The ultimate purpose of market regulation and control can only be one: to develop the market, not to destroy it. China's economic transformation and development dictate that China's capital market must fulfill its rightful, irreplaceable historical role. Any action that contradicts this direction bears an unforgivable historical responsibility. Under the great trend of capital globalization, the stability and security of the domestic capital market is a matter of equal importance to national defense. The 1/2 line that this ID pointed out in early May has not only technical significance but also marks the watershed between old and new operating models. The most important aspect of this is closely related to whether the regulatory and control model can keep pace with the times. If we say that the improvement of listed companies' earnings provides sufficient fundamental support for market development, then the timely evolution of the regulatory and control model will provide even greater fundamental support for market development. In a certain sense, this is the market's greatest fundamental factor.
The technical analysis given in early May remains valid. Currently, this 1/2 line has risen to 4144 points, with the Shenzhen Component Index at a corresponding position of 13700 points. Whether it can ultimately hold above this line is the key to determining if the medium-term trend resumes its strength. Before that, the market will gradually digest technical and policy pressures through oscillation. Among these, the May moving average currently near 3600 points is the key to determining whether the market correction is normal. As long as this line is not effectively broken, the correction remains within the normal range. Otherwise, the correction period will be greatly extended. Since June and July mark the beginning of the mid-year earnings season, first and second-tier blue-chip stocks have certain fundamental support, which plays a key role in stabilizing the index. Meanwhile, third-tier thematic stocks will differentiate — only those with genuine fundamental improvement will strengthen again. The rest, after a certain technical rebound, will mostly enter corrections of relatively large levels.
Finally, a passage from "The Analerta" that has been repeatedly cited but must be cited once more, as encouragement for all market participants:
Zi Gong asked about governance. The Master said: "Sufficient food, sufficient arms, and the trust of the people." Zi Gong said: "If one had to give up one of these three, which should go first?" He said: "Give up arms." Zi Gong said: "If one had to give up one of the remaining two, which should go first?" He said: "Give up food. Since ancient times, all men must die. But without the trust of the people, a state cannot stand."
Appendix:
For the sake of China's capital market's tomorrow, so that there will be no more ambushes like this, so that regulators know their power cannot be wielded arbitrarily — today, this special movement on this special day is something that must be endured. After today's close, the eyes of the entire world will focus here. Although the regulators' unified-tone articles across major media this morning already hinted in that direction, it's not enough. The recognition is not deep enough, and the wording still carries the flavor of parents lecturing children. Investors need educating, but so do regulators.
Technically, the article above has stated it very clearly: watch the May moving average. After today's drop, that line has come down to 3540 points. From a short-term perspective, entering around this line poses little problem. Over the weekend I said you must watch for catch-up declines — don't buy so-called "resilient" stocks. Today, those stocks all came down. Now, from a rebound perspective, you must only enter stocks that have dropped 40% or more, ideally to their half-year or even annual moving averages. Once the market stabilizes somewhat, their rebound momentum will be stronger.
For those who still haven't exited and are still fully invested: first, leaving now holds little significance. Forget about technicals — just looking at historical data, there will certainly be much better levels than the current one in the future. For the most unfortunate friends who are fully invested, you must hold your ground right now. After the first major rebound appears, you absolutely must cash out at least half your positions first, then look for re-entry opportunities on the dip to bring down your cost. Because after this kind of movement, medium-term oscillation is inevitable, and having capital means having opportunity.
Of course, for those who exited at the second sell point on the 30th and have light positions, the current task is to properly seize the major rebound that will certainly appear this week. Note: if your skills aren't strong, you should gradually buy into heavily oversold individual stocks, but with focus and concentration. During a rebound, if you're still holding dozens of stocks, there's no way to manage operations.
On specific levels: as the article above states, the May moving average is a key level. If it breaks below, from a short-term perspective, it would be a bear trap. Whether it can break below depends on where the short-term divergence point appears — this is the most important reference for those with decent skills. Since large-cap stocks already saw their catch-up decline today, you must closely watch the market's movements. Due to the current pattern shown on the 30-minute chart, the most direct effect of the rebound is to pull the 30-minute MACD back to the zero axis. That zero axis represents the maximum resistance for the rebound.
This kind of market tests all participants. Those who can endure it will emerge more mature. Some lessons must be remembered: never have illusions about declines. At a second-type sell point like May 30th, you must exit — otherwise you'll have no ammunition for the counterattack.
Replies
缠中说禅 2007/6/4 15:43:40
Fellow retail investors — for the sake of China's capital market's tomorrow, so that there will be no more ambushes like this, so that regulators know their power cannot be wielded arbitrarily — today, this special movement on this special day is something that must be endured. After today's close, the eyes of the entire world will focus here. Although the regulators' unified-tone articles across major media this morning already hinted in that direction, it's not enough. The recognition is not deep enough, and the wording still carries the flavor of parents lecturing children. Investors need educating, but so do regulators.
Technically, the article above has stated it very clearly: watch the May moving average. After today's drop, that line has come down to 3540 points. From a short-term perspective, entering around this line poses little problem. Over the weekend I said you must watch for catch-up declines — don't buy so-called "resilient" stocks. Today, those stocks all came down. Now, from a rebound perspective, you must only enter stocks that have dropped 40% or more, ideally to their half-year or even annual moving averages. Once the market stabilizes somewhat, their rebound momentum will be stronger.
For those who still haven't exited and are still fully invested: first, leaving now holds little significance. Forget about technicals — just looking at historical data, there will certainly be much better levels than the current one in the future. For the most unfortunate friends who are fully invested, you must hold your ground right now. After the first major rebound appears, you absolutely must cash out at least half your positions first, then look for re-entry opportunities on the dip to bring down your cost. Because after this kind of movement, medium-term oscillation is inevitable, and having capital means having opportunity.
Of course, for those who exited at the second sell point on the 30th and have light positions, the current task is to properly seize the major rebound that will certainly appear this week. Note: if your skills aren't strong, you should gradually buy into heavily oversold individual stocks, but with focus and concentration. During a rebound, if you're still holding dozens of stocks, there's no way to manage operations.
On specific levels: as the article above states, the May moving average is a key level. If it breaks below, from a short-term perspective, it would be a bear trap. Whether it can break below depends on where the short-term divergence point appears — this is the most important reference for those with decent skills. Since large-cap stocks already saw their catch-up decline today, you must closely watch the market's movements. Due to the current pattern shown on the 30-minute chart, the most direct effect of the rebound is to pull the 30-minute MACD back to the zero axis. That zero axis represents the maximum resistance for the rebound.
This kind of market tests all participants. Those who can endure it will emerge more mature. Some lessons must be remembered: never have illusions about declines. At a second-type sell point like May 30th, you must exit — otherwise you'll have no ammunition for the counterattack.
缠中说禅 2007/6/4 15:48:23
[Anonymous] Sina User
2007-06-04 15:37:29
[Anonymous] Stock Louse
2007-06-04 15:35:21
Boss: Has the first wave of the bull market ended? Will tech stocks take the lead next?
======
Definitely not. The first wave ending requires a quarterly-level correction.
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Correct — at least a monthly-level correction. The concept of these three waves must be viewed within a 20-to-30-year grand cycle.
缠中说禅 2007/6/4 16:08:19
[Anonymous] 蓝筹也看缠
2007-06-04 15:56:08
May I ask the blog host: how much room for blue-chip stocks to decline further?
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Until they've hammered the index to its target.
缠中说禅 2007/6/4 16:13:01
Two Tigers
2007-06-04 16:05:30
Heavenly Sister, isn't this kind of drop letting traitors and ill-intentioned foreigners get their way?!
One rotten apple spoiled the whole barrel.
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That's not the issue right now. Stubbornly resisting at this level is useless. Better to smash it down and create space — with ammunition, you can naturally eliminate enemies. That's why this ID posted before 7 AM on the 30th. I wonder how many people understood.
缠中说禅 2007/6/4 16:16:10
[Anonymous] 启程
2007-06-04 16:06:51
Rain or shine, I still worship you!!
But I wanted to ask... I built positions this afternoon. Although I didn't see a buy point, I just felt there'd be an oversold rebound. My position is now about 90%. Please advise.
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Actually it's best to wait patiently for buy points. In such a decline, small-level buy points carry great risk if you can't escape on T+1. Also, this kind of position building has a gambling element — it should be done in batches. Better to miss out and skip a rebound than to compromise capital and position safety.
缠中说禅 2007/6/4 16:18:35
[Anonymous] Sina User
2007-06-04 16:11:35
Who says meat prices are too high to restrain? The whole nation is nothing but people cutting their losses!
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Even though I luckily got out early, reading this line still makes me want to cry. — Who says meat prices are too high to restrain? The whole nation is nothing but people cutting their losses!
=
That kind of mentality has no place in the investment market. This is not a charity — it's a battlefield. No room for sentimentality.
缠中说禅 2007/6/4 16:20:32
[Anonymous] Sina User
2007-06-04 16:16:44
Master Chan,
Can you look at 000010 (cost basis 14.60)? There hasn't been any opportunity to reduce positions these past few days.
==
There was opportunity on the 30th — you just had illusions. That's the lesson you must learn.
缠中说禅 2007/6/4 16:25:36
[Anonymous] Sina User
2007-06-04 16:18:53
Sister Chan, can I still hold ST stocks??? Or do I need to cut them? Please show me the way! Many thanks!!! Days of hitting the floor aren't pleasant! Should I sell during the rebound or keep holding and wait for the main force to distribute???
==
This stock has been discussed many times. It shouldn't have been bought in the first place. That day this ID specifically said not to buy small-caps. Then said it again several times. If you're still holding, you can only wait for the rebound. These stocks only move 5% per day, so the rebound naturally favors those that dropped more. The medium-term thesis for this stock mainly rests on the injection of copper mine assets into its fundamentals. Whether to continue on this path depends on how clean the price action looks.
缠中说禅 2007/6/4 16:26:59
Two Tigers
2007-06-04 16:19:35
Heavenly Sister, some people come here with vulgar language — please don't take it to heart.
They're deliberately here to cause trouble.
We love you! We believe in you! We thank you!
We cherish this connection between us!
==
We're not in the market to argue. All such comments should be completely ignored. Master your skills and profit in the market — that's the only thing worth doing.
缠中说禅 2007/6/4 16:28:02
[Anonymous] 蓝筹看缠
2007-06-04 16:26:47
Thank you, blog host, for answering my question. Should I fully exit blue-chip stocks on the rebound? Can I add to positions tomorrow?
==
You should exit on the rebound. This kind of movement has a virtually zero chance of forming a V-shape.
缠中说禅 2007/6/4 16:29:53
[Anonymous] 三藏
2007-06-04 16:26:22
If the connection between the market and warrants is lost
I'll never play again — the risk is too high!!
Could the boss explain the issue above?
==
Quit while you're ahead — at least reduce your trading volume.
缠中说禅 2007/6/4 16:30:59
[Anonymous] 承认错误
2007-06-04 16:23:16
Why can't I see my post? Reposting:
I rarely comment, but at a time like this, I firmly support the blog host!
Although my losses this time are severe — and most were on the blog host's "16 Army Corps" stocks (didn't buy them when they were winning, but went heavy when they lost). But my greed and irrationality maximized my personal losses, and I imagine many friends are the same.
We should examine ourselves and study hard.
Firmly support the blog host! Firmly bullish on the bull market! We will take back what we've temporarily lost!!
==
Who you support isn't important. The key is watching the buy and sell points.
缠中说禅 2007/6/4 16:32:57
[Anonymous] 罗技
2007-06-04 16:29:44
Now I finally understand why the financial management course says "A stock market without futures for hedging cannot be traded"!
For individual stocks, without stock futures (single-stock futures) for insurance,
it still can't be traded.
For wealth management, real estate is a better choice!
==
The key isn't what instruments you have — it's your skill. Even with futures during a huge bull market, you'd still die N times over — the blowing-up-your-account kind. Don't believe the nonsense about hedging risk.
缠中说禅 2007/6/4 16:34:16
Two Tigers
2007-06-04 16:31:11
Heavenly Sister, how much of a rebound should we sell at? For example, currently down 40%.
==
Half the position. If you're skilled and capital isn't large, you can fully exit. Buy back into better picks on the dip.
缠中说禅 2007/6/4 16:36:46
This ID has to go to a gathering again. Heading out now, see you tomorrow morning.
缠中说禅 2007/6/4 7:55:20
Heading out now. Today's market commentary will be appended to this article after the close.
See you after 3:30 PM.