Long Liquidation Spreads, Accelerating the Arrival of a Short-Term Bottom

2008/3/17 15:17:29

Drawing pies can't save market confidence, and neither can propping up PetroChina as window dressing. This naturally leads to the spread of long liquidation. However, this actually accelerates the arrival of a short-term bottom.

Today, as previously discussed, those who still had hopes for the conference finally started dumping too. Of course, what's still missing is some die-hard bulls sacrificing their arms and legs. Without those arms and legs, the rebound won't have any real force.

Now, let's purely discuss the technical issues and not repeat things that have already been said many times. Look at the 60-minute chart from 6124 points down below, and the big picture becomes crystal clear. This decline so far has only produced 4 line segments, without forming even a single 1-minute hub — note, this is a 1-minute hub on the 60-minute chart.

Obviously, a standard decline pattern would be: within this 5th line segment, one stroke pulls back toward segment 3 to form a type-third sell point, then breaks below again. Once the current conditions satisfy the interval nesting, the true bottom can be precisely located.

However, the pullback stroke toward segment 3 has not yet appeared. Therefore, the nature of the upcoming rebound is a pullback toward segment 3. If it forms a type-third sell point, that would be ideal. If instead it goes back up, it proves that the consolidation of the type-hub formed by segments 3 and 4 is still ongoing, and there will be more turbulence ahead.

So, the short-term rebound we're talking about is super clear technically. Everyone can see that the MACD at position 4 sits right at the zero axis — meaning it's suppressed there and can't go up — then breaks down again. This is a very standard trend pattern.

Generally speaking, to see the rough big trend, you can use the large chart. For example, PetroChina — look at the daily chart: from 48 down, not even a single line segment has been completed. Now, there's a good chance of it walking into the 4th stroke of this line segment.

So, we now have a very clear grasp of this rebound, and the specifics can be applied to individual stock operations. However, the more precise positioning of this rebound point must be sought by combining smaller charts. The large chart only provides a rough outline.

Tomorrow's press conference is very likely to be a catalyst for consolidation. If nothing noteworthy comes out of it, another batch of people will dump after the consolidation. Once this batch also dumps, things will start to get interesting.

Right now, what the market needs is more broken arms and broken legs. Even if fundamentals offer nothing, one can still pull off a technical play. But for a technical play, even more broken arms and broken legs are needed.

Let me put it even more explicitly: if fundamentals have no substance, then any rebound can only be technical in nature, which requires more thorough selling before there's room for a rebound. So the market's choice hinges on a clear premise: substance or no substance.

Signing off. See you.