Annual Moving Average Support First Appears

2008/1/29 15:19:24

First, let's talk about 580989 again. See how enormous that hub's power is — the gap in the morning, the pullback afterward — everything was textbook, oscillating around the original hub. This was already discussed yesterday. Going forward, oscillations will gradually decrease. Since the hub is roughly around the 0.6 level, there's room for successively lower oscillation ranges. Think about it: a single hub oscillation can go from 0.4 to 0.95 — that's the power of oscillation.

The reason this ID brings this up is to demonstrate certain aspects of this ID's theory in a vivid way. You don't need to participate in its operations, but please make sure you study it. Also, the morning drop to 0.72 followed by a step-by-step recovery to 0.85 — this is a very typical deceptive chart pattern. After such patterns, they typically create a second-type sell point, and then what follows is that the trend must complete itself, with another wave of selling. Study these patterns more; they're extremely useful for understanding the formation and structure of hubs.

You absolutely must not trade this, but you must study it — that's the purpose of this classic case study of 580989.

Now for the broader market. The market touched the annual moving average today — this is the first time. As this ID said at the end of last year, there will be at least two touches this year, and the first one should be a comedy. However, the annual line could also first create a bear trap; everything requires the coordination of various forces.

Trends are not predetermined. For instance, if the U.S. doesn't cut rates today and the whole world crashes, then the bear trap pattern will play out. Otherwise, it could go straight up. As for whether the U.S. cuts rates or not — nobody knows, but today the market has already priced in a rate cut. This is a manifestation of aggregate forces. If the bet is wrong, the market will retaliate in the opposite direction.

Of course, these trends can be participated in. Why? Because even if it takes the bear trap route, it won't stray too far from the current level. As long as you control your position size well, you can certainly participate.

Additionally, you must keep in mind: you are neither a bull nor a bear, but you must know what the bulls will do and what the bears will do if a certain situation occurs. For example, the bulls' desire is surely to fill the gap above — this constitutes a latent force in the market. Under interference from other forces, this force may not manifest immediately, but this actually creates an even better buy point for us.

Please savor this statement carefully: You don't side with the bulls or the bears, but you must know what the bulls and bears want to do. The trend is the final result. Whether they achieve what they wanted — that's what matters. If they fail, what are the consequences? What subsequent steps will they take? That's what you should be thinking about.

The current trend is simple: as long as the annual moving average isn't effectively broken, it remains the same hub oscillation. What does hub oscillation look like? Look at today's 580989. It's a textbook case — once you understand it, what oscillation can't you handle?

Heading out first, see you later.