Teaching You to Trade Stocks 48: Crashes — The One-Night Stands of Bull Market Rallies
2007/4/24 8:52:02
Previously in the daily market analyses, I bluntly stated that for the crashes the bears dream of day and night, such crashes are actually forever irrelevant to the bears. Because when it really drops, bears just get verbal pleasure and psychological satisfaction, but human mental inertia ensures that bears never have the chance to obtain satisfactory positions at prices they're happy with. Crashes, for a bull market, are like one-night stands — fierce and thrilling, but in substance, a one-night stand is just a one-night stand. After April 19th, whatever was supposed to happen still happens.
Just as sexual energy accumulates and needs release, the bull market's corrective energy also needs to be discharged. The biggest difference between this kind of release and a bear market is its April 19th-ification. April 19th is always fierce and wild — otherwise there'd be no need for it. Corrections in a bull market are the same — they come as raging storms, just like major rallies in a bear market. The most famous bear market mega-rally was probably the suspension of government bond futures, when the index went from below 550 to above 920 in three days, and then continued to decline back down afterward. In bull markets, the most famous crash was probably December 1996, when under policy attacks, it plunged with consecutive limit-down days, from above 1250 to around 850 in a few days, and then continued to rise. All true major tops are constructed through repeated assaults, with sufficient time for you to react and judge. V-shaped tops essentially never constitute real tops in major movements, just as one-night stands essentially have a 0% chance of turning into lifelong relationships. So those who hope for a crash every day are like those who wish for a one-night stand every day — both harbor subconscious tendencies toward promiscuity, and the promiscuous ultimately get ruined, with no good end.
There's an erroneous view about risk — as if risk is greater when stock prices or P/E ratios are high, and smaller when they're low. Yet stock prices and P/E ratios are merely fluctuating variables with no absolute significance. This ID has repeatedly emphasized that risk in the market is absolute — you're always amid risk. If you can grasp this ID's theory, then not only can you keep risk under absolute control at your operational level, you can even exploit risk to reduce costs. Risk-free positions can be created — zero cost is absolute risk-free. If you don't understand this, then the simplest moving average system can still control risk.
But from the standpoint of the absolute nature of social wealth growth, the greatest risk is that your wealth growth fails to keep up with the average growth of social wealth. Within the capital market subsystem, the principle is the same. Therefore, in a great bull market, accumulating positions is even more important. During a major rise, having 10,000 shares at 3 yuan, only 1,000 at 4 yuan, and zero by 30 yuan — this is the greatest risk, because the market's rise hasn't generated the proper total profit for you. Your positions were lost. Without positions, you have no admission ticket for profit in the market. In a market without short-selling mechanisms, shorting ultimately serves the purpose of going long again — unless you exit the market permanently. Especially when the bull market rally persists, this point becomes even more important. Without positions, you can't profit with your mouth alone.
The best scenario, of course, is what was described before: continuously reducing cost before reaching zero, and continuously earning more shares after reaching zero. This way, the higher the stock price rises, the more shares you have, and your true market value keeps growing. Someone asked this ID: how will you eventually unload? This ID counters: why unload? Every oscillation becomes an opportunity for this ID to lower costs and increase share count. Do you know what the highest realm is? It's that on the day the great bull market truly ends, you own the maximum number of shares at zero cost, and then (the next 419 characters deleted). The market is never a charity. To conquer the market, you must have the correct grand strategy and overall methodology.
Facing oscillations and corrections properly — obviously, after the market's medium-to-short-term energy is exhausted, the market will experience major corrections. If we say February 27th and April 19th were one-night stands on the daily chart, then one-night stands on the weekly, monthly, quarterly, or even yearly chart are absolutely possible within this great bull market lasting at least 20+ years. But this is absolutely not an excuse for bears to cheer with their mouths, but rather a great opportunity for true operators to reduce costs and increase positions. Of course, operational precision is a technical issue — those with better technique can push costs lower and accumulate more shares. This is entirely normal: better technique deserves better returns; that's the natural order. But precision can be achieved through market practice, whereas errors in strategy and methodology are hopeless — that's the root of the problem.
From a purely technical standpoint, grasping the level of a one-night stand is very important. A daily one-night stand and a yearly one-night stand obviously differ in magnitude. In this great bull market that started mid-2005, to date, essentially there hasn't even been a weekly-level one-night stand crash. The two major weekly corrections each had weekly declines of only 7%, which didn't even match February 27th's daily one-night stand. On the monthly level, there hasn't even been a single truly meaningful decline. So why do so many people still act like frightened birds every day?
If you can't handle daily one-night stands, it proves your technical level doesn't reach the degree needed to handle daily one-night stands. Then go handle weekly or monthly ones — those require lower technical precision. Arrange some activities within your capabilities. One-night stands also have levels. Whether you can navigate one-night stands of all levels with ease is the test of your technical mastery.
Things are often interconnected. Whether in technique or otherwise, precision is earned through practice. Tonight, shall we also have an April 19th moment?
Appendix:
Today the market found support at yesterday's small hub of 3688–3692. The afternoon 5-minute consolidation top divergence shouldn't have been hard to grasp. From this you can see that daily movements between consecutive days do have certain technical significance. Today was a balanced market, closing mediocrely. Since the 5-day moving average will catch up tomorrow, the key remains the 5-day moving average — if it stabilizes, look for opportunities to attack upward; otherwise it will be drawn toward yesterday's gap. Today's balanced market with huge volume — the key is to effectively break above today's hub; otherwise significant oscillation is unavoidable. The next two days of movement are extremely critical. Keep your eyes wide open watching the movements of the next two days. The small hub at 3688–3692 below must not be effectively broken.
Currently this is the pattern this ID described before — second-tier stocks opening up space while third-tier stocks catch up. But this pattern requires a transition so that index component stocks can restart; otherwise oscillation is inevitable. Currently, don't randomly switch stocks. Whatever needed switching should have been switched already. Otherwise under T+1, one wrong rhythm leads to total chaos. For short-term traders, pay attention to the final evolution direction of today's hub to determine entries and exits. For medium-term, it doesn't matter — watch the 5-week moving average.
Very busy today. There's a meeting shortly. I'll be back at 9 PM tonight to answer questions.
Heading out. Goodbye.
Replies
缠中说禅 2007/4/24 8:56:46
[Anonymous] 蚕丝
2007-04-24 08:54:14
Good morning, Boss! One look at my username and you know where I come from, haha. I don't doubt the objective validity of this entire theoretical framework, and I envy the candor and directness with which you express your views. But honestly, it's really quite hard to understand and apply well. So far I feel that tips from friends are still more practical. My admiration nonetheless remains like a surging river...
When you come to Shenzhen on business, give me a chance to treat you to a refined little restaurant in Overseas Chinese Town for a relaxing chat. My number: 13828784409
PS: This isn't like that number from Ge You's movie, haha...
==
Please don't leave phone numbers online. There's no guarantee someone won't impersonate this ID. Please note.
缠中说禅 2007/4/24 15:23:54
Today the market found support at yesterday's small hub of 3688–3692. The afternoon 5-minute consolidation top divergence shouldn't have been hard to grasp. From this you can see that daily movements between consecutive days do have certain technical significance. Today was a balanced market, closing mediocrely. Since the 5-day moving average will catch up tomorrow, the key remains the 5-day moving average — if it stabilizes, look for opportunities to attack upward; otherwise it will be drawn toward yesterday's gap. Today's balanced market with huge volume — the key is to effectively break above today's hub; otherwise significant oscillation is unavoidable. The next two days of movement are extremely critical. Keep your eyes wide open watching the movements of the next two days. The small hub at 3688–3692 below must not be effectively broken.
Currently this is the pattern this ID described before — second-tier stocks opening up space while third-tier stocks catch up. But this pattern requires a transition so that index component stocks can restart; otherwise oscillation is inevitable. Currently, don't randomly switch stocks. Whatever needed switching should have been switched already. For short-term traders, pay attention to the final evolution direction of today's hub to determine entries and exits. For medium-term, it doesn't matter — watch the 5-week moving average.
Very busy today. There's a meeting shortly. I'll be back at 9 PM tonight to answer questions.
Heading out. Goodbye.
缠中说禅 2007/4/24 21:12:20
Hello everyone, running a bit late, sorry. Today this ID's blog seems to have unusual volume activity — did someone play the counterparty side?
缠中说禅 2007/4/24 21:15:49
[Anonymous] 技术学习ing
2007-04-24 21:09:32
"Keep your eyes wide open watching the movements of the next two days. The small hub at 3688–3692 below must not be effectively broken."
May I ask the blogger, what counts as an effective breakdown? Three consecutive 5-minute K-lines closing below 3688?
=
Exiting at the first-type sell point is the most proactive. The second type is also good. The third is a bit worse. If you always wait for the third type before running, it gets exhausting. Try to exit at first or second type. Of course, the smaller the level, the greater the operational difficulty and the higher the required technical precision — this improves through practice.
缠中说禅 2007/4/24 21:22:01
[Anonymous] 白玉兰
2007-04-24 21:14:21
Hello sister!
Should the next phase focus on second-tier index stocks? Are third-tier stocks going to take a break?
==
This transition isn't necessarily going to succeed yet. But with the deep investigation into the Hang Xiao Steel affair, concept stocks will show some restraint. This ID has always opposed taking concepts too far — this absolutely needs crackdown. Going forward, individual stock movements will further diverge. To put it bluntly, the future will increasingly depend on each stock's own market makers — the rhythm will gradually evolve into a free-for-all among multiple operators.
缠中说禅 2007/4/24 21:22:56
[Anonymous] 上课啦我举手
2007-04-24 21:18:02
From market close until now, everyone's saying People's Daily will publish an editorial tomorrow. I'm dizzy.
The blogger is in Beijing with broad connections and insiders — is there any policy-front news?
==
If they're still resorting to such tactics now, that's the regulators' shame.
缠中说禅 2007/4/24 21:24:47
[Anonymous] Sina User
2007-04-24 21:21:46
Bank stocks have been persistently sluggish recently. How does the master see it?
==
That's perfectly normal. If they all surged, everyone would quickly have nothing left to eat.
缠中说禅 2007/4/24 21:29:24
[Anonymous] 缠心雕龙
2007-04-24 21:22:10
Lesson 47 original text: "You could clearly know that after breaking below the 10:30–13:30 hub, there would first be a small third-type sell point. After the small third-type sell point, two possible evolutions... one being a decline with at least two more downward segments... For a decline that breaks below a hub, after the third-type sell point and two more waves, it can become complete at any time. Because this decline is below the 1-minute level, from its details you cannot find a buy point confirmed by 1-minute divergence — you can only use tick-level divergence."
- Is the small third-type sell point after the break below the 10:30–13:30 hub at 14:08?
- Why does it say "For a decline that breaks below a hub, after the third-type sell point and two more waves, it can become complete at any time"?
- "Because this decline is below the 1-minute level" — this "decline" starts from where? Is it 1-minute level?
- Is the decline starting from 13:30 at the 1-minute level? It doesn't seem to be a trend, nor does it have 1-minute divergence?
==
For a trend, after two hubs it can end at any time — that's the most basic concept. Intraday declines of this kind are basically never at the 1-minute level; more likely they're at a level below 1-minute. And the level of divergence doesn't necessarily match the level of the trend — that's the most basic concept. Otherwise how could there be small-level-to-large-level transformation?
缠中说禅 2007/4/24 21:33:03
[Anonymous] 钢股份
2007-04-24 21:26:37
Waiting for the Queen!
Today I suddenly got very nervous and ended up selling all my stocks, going to cash overnight. But right after I sold 600005, it immediately surged close to the daily limit up.
Mainly because the gap below is too large. Recently there are constant rumors that the gap must definitely be filled, and individual stocks face a 20% major correction. Even as a medium-term holder, such swings are intolerable. Looking at charts for operations, but as the Queen should know my situation — I can't watch the market during the day, and I use phone-based trading. I can't afford short-term trades or move fast enough.
Can't gamble against the market for tomorrow.
Question: If tomorrow's movement is the same as today's, would it still not qualify as stabilization? What specific situation would eliminate the possibility of a major consolidation going forward? In other words, what constitutes an "effective breakdown" and an "effective stabilization"?
==
Operating this way actually makes it easier to make mistakes. The 5-day moving average hasn't broken — and for medium-term, the 5-week moving average hasn't broken either. What's the big deal?
Going forward, note this: if your mood is bad and you're especially panicked, tormented by fear, then go half-position. You definitely won't go wrong. At that point, forget about technique — adjust your mindset first, then technique.
So people come first. Even if you understand this ID's theory, whether you can apply it successfully ultimately comes down to personal cultivation.
缠中说禅 2007/4/24 21:46:47
[Anonymous] 小凤
2007-04-24 21:30:06
Could Queen Chan recommend a stock?
==
Stocks need to be nurtured and grown. Those who demand new stocks every day will inevitably always have small capital, small plays. Look at this ID's 14 stocks from the year — some still have consecutive limit-ups. Why not nurture them well? This ID won't recommend any stocks now, mainly because the market's current position isn't one where it's worth buying stocks. And this ID's 14 stocks still have considerable medium-term potential, but there's no reason to buy now because it's not a good buy point.
缠中说禅 2007/4/24 21:50:40
[Anonymous] 你的样子
2007-04-24 21:39:37
Boss, you've worked hard. Finally didn't wait for nothing.
Boss, could you explain whether that small hub is in the time period from 04/23 13:51 to 04/23 14:00? Why is this small hub the benchmark for judgment?
Also, what constitutes an effective breakdown — after a breakdown, if the rebound can't reach this small hub, does that mean it's effective?
==
Actually, whether an effective breakdown occurs or not is the same concept as whether there's a third-type sell point. But it's best to operate at the first or at most the second sell point, since the third sell point is already some distance from the true high.
缠中说禅 2007/4/24 21:51:03
[Anonymous] 你的样子
2007-04-24 21:39:37
Boss, you've worked hard. Finally didn't wait for nothing.
Boss, could you explain whether that small hub is in the time period from 04/23 13:51 to 04/23 14:00? Why is this small hub the benchmark for judgment?
Also, what constitutes an effective breakdown — after a breakdown, if the rebound can't reach this small hub, does that mean it's effective?
==
Actually, whether an effective breakdown occurs or not is the same concept as whether there's a third-type sell point. But it's best to operate at the first or at most the second sell point, since the third sell point is already some distance from the true high.
缠中说禅 2007/4/24 22:00:11
Attention everyone:
From this ID's account, apart from the earliest 14 stocks mentioned, there have since been Beijing stocks, VC stocks, Shenzhen local low-priced stocks, and small/medium board miniature stocks. These stocks all still have medium-term potential, but if you didn't buy them before, there's absolutely no need to chase them at high prices now. This ID doesn't need anyone to carry the sedan chair. This ID only hopes everyone buys at buy points, and preferably at larger-level buy points.
If a major correction occurs later, these stocks will continue performing as before. So opportunities can be waited for — absolutely don't chase highs. For those already holding, wait for the appearance of a larger-level sell point. If no sell point has appeared, just hold.
缠中说禅 2007/4/24 22:06:17
I'm sorry, everyone, attention:
I forgot to mention the sector most likely to produce dark horses: stocks that were expected to report bad earnings but didn't decline and instead rose. Once the market corrects, these stocks, after following the correction, the ones showing strong subsequent movement will be the dark horses ahead.
After full circulation, there is no stock whose earnings cannot be improved. This ID has intelligence on N stocks of companies deliberately publishing poor earnings. But this is a regulatory period, and this ID doesn't want to cause trouble. Everyone just pay more attention.
To be safe, if you're not particularly certain, don't buy ST-starred stocks. Although this ID has intelligence on several such stocks, if you don't understand them, then don't buy — getting delisted would be very troublesome.
Resourceful people can screen out those stocks deliberately sandbagging their earnings, then select the ones with obvious unusual activity. Dark horses aren't hard to find — it's more interesting than having this ID spell it out directly.
缠中说禅 2007/4/24 22:09:21
[Anonymous] 诚诚
2007-04-24 22:02:23
Champions League tonight. I like Manchester United to not lose. Tomorrow night, Liverpool will use iron-blooded defense to block the revenge-seeking Blues. The excitement is worth anticipating.
It seems the master will also have to break the rule and stay up late, right?!
==
Yes, these two days, for this ID, football is more important than stocks. This ID is preparing to stay up two nights. But I need to sleep before 11 PM and wake up at 2:30 AM.
缠中说禅 2007/4/24 22:16:38
[Anonymous] Sina User
2007-04-24 21:47:41
Boss, a question: for a 30-minute upward a+A+b+B+c+C, B must be formed by down-up-down. If it's formed by up-down-up, can it be considered part of b instead? Also, if b versus c shows no same-level divergence, but a consolidation divergence c' within C causes a decline breaking below C — is the decomposition point at c' or c? Does this situation count as small-level-to-large-level?Thank you.
==
Generally that's the case. If hub C appears, it means the uptrend is extending. It's the same as the two-hub scenario — just refer to that case.
缠中说禅 2007/4/24 22:20:35
[Anonymous] 端一
2007-04-24 22:14:10
Blogger: Do tech stocks count as second-tier? Why haven't they moved yet — are they waiting for catch-up gains? Thanks!
==
This question was addressed N months ago. In the first wave of a bull market, the most important are the index component stocks. The second wave is when growth stocks take center stage — that's when tech stocks become the lead actors.
Some ask why 938 and 998 among this ID's 14 are so weak. That's perfectly natural. For these stocks, this ID was positioning them for the entire bull market. In the first wave, they were never meant to be too bullish. But wait until the second wave. Of course, during the first wave, tech stocks will also follow along, just relatively slowly. Actually, it's not hard to notice: whenever tech stocks start moving, the market is about to prepare for a correction. This is a market rhythm issue.
缠中说禅 2007/4/24 22:23:43
[Anonymous] 古代
2007-04-24 22:19:12
Teacher, will Man United's Chinese player Xiao Dong play tonight?
==
Aren't you basically insulting AC with that?
缠中说禅 2007/4/24 22:28:13
[Anonymous] 钢铁大道
2007-04-24 22:17:54
Hello, Your Majesty. Reporting today's operations:
Today I went heavy into 600021 and 600531 in the afternoon. After reading your commentary on the market, I'm quite anxious. If the market corrects tomorrow, should I continue holding medium-term, or go half-position?
Thank you, Your Majesty.
==
There's nothing to be anxious about. Oscillation is a fun game — letting those who don't want to hold over the May 1st holiday exit is quite a nice thing.
This ID's advice to everyone is: if you feel your heart can't take it, the best thing is to find an opportunity to go half-position, or just don't look at the market at all. For medium-term, watching the 5-week moving average is enough.
But for those with good technique and good mindset, the above advice doesn't apply.
Please note: operations must be within your capacity. Know what you're doing and what consequences you'll bear before acting. Don't put too much pressure on yourself. Your health is more important than stocks.
缠中说禅 2007/4/24 22:31:21
[Anonymous] 学缠人
2007-04-24 22:26:02
Hello Sister Chan!
Are the stocks deliberately reporting bad earnings referring to annual report bad earnings or Q1 quarterly report bad earnings?
Thanks!
==
Both are possible. For those with particularly good annual or quarterly report earnings but obviously exhibiting distribution patterns afterward — be more careful with those.
缠中说禅 2007/4/24 22:33:25
PS：2007-04-24 21:44:45
Hello Chan MM!
The traitor fund is going to be investigated thoroughly. Should all the stocks it holds be dumped?
===
Chan sister, same question. Please help answer.
Thanks!
==
The key is the stock itself. The traitor getting into trouble will have short-term impact. What we hope now is for all the traitors to be exposed — nobody wants them around. But medium-term won't be affected by these minor issues.
缠中说禅 2007/4/24 22:36:59
Sorry, this ID needs to rest. At 2:45 AM I still need to watch football.
AC vs Manchester United — this ID doesn't have any particular preference. So let AC be slaughtered by Liverpool again then.
Of course, reason says that movements have alternation, so this outcome is actually hard to produce.
Enough idle talk.
Good night, everyone.
Heading out. Goodbye.
缠中说禅 2007/4/24 8:55:19
This article doesn't target any specific day's movement. The daily movement analysis will be given at 3 PM after the market close.
Heading out. Goodbye.