Four Evolutionary Scenarios on the Weekly Chart
2007/7/27 8:01:59
Apologies—got back to Beijing too late last night and didn't write a post. Making up for it now. Another apology: while traveling, I can only discuss stocks—no time to write about other topics. Back home, things will return to the normal schedule next week.
The market made a new high without disagreement, which is precisely what creates real disagreement. As mentioned the day before yesterday, the biggest disagreement now is whether this is a true or false breakout. But regardless of true or false, the pullback, retest, and confirmation after a breakout are bound to happen. From a weekly chart perspective, there are four scenarios: the first is an adjustment via this week's upper shadow; the second is an adjustment via next week's weekly candlestick. The former is weaker, and the latter is stronger. Of course, there's an even stronger scenario where next week continues with a big positive weekly candle, with intraday daily plunges for shakeouts, and the real adjustment doesn't come until the following week. The strongest is a relentless squeeze—multiple consecutive weekly positive candles with all adjustments completed on the daily level.
Everything is determined by the market's resultant force. Just use this ID's theory to judge the market's choice in real time. For example, today we face the choice of whether the first scenario materializes, which can be determined by today's real-time price action. From the regulators' perspective, if the third or fourth scenarios play out, then potential fundamental changes—like a unilateral stamp tax—would face even greater resistance. For the medium-to-long-term health of the stock market, this ID opposes the latter two scenarios. Of course, this ID is only one component of the market's force, and besides, this ID is riding comfortably in the sedan chair, so this opposition is at most verbal. If some bored torch-bearers insist on the third or fourth scenario, this ID, from a short-term profit standpoint, really has no reason to object either. The only thing this ID can do is wait until these frenzied sedan-carriers exhaust themselves, then knock them unconscious with one blow and give them a lesson in market risk—in cooperation with the regulators' risk education.
As for the first and second scenarios, this ID can accept both. Honestly, this ID prefers up-and-down oscillation—the more oscillation, the more spread captured. One-directional moves are actually not that interesting. From a purely technical standpoint, the current 5-day moving average is the key to determining whether direct true breakout is possible. If by early next week the 5-day MA has moved up to the current level but the index still can't break free of the current range, the probability of the market falling back becomes unavoidable.
To summarize: the second scenario is most favorable for the bulls, while the first gives the bears a breather. As for the third and fourth scenarios, those are pure suicide—sewing wedding dresses for this ID. Of course, there are plenty of people in this world who want to die, and this ID certainly doesn't dislike those who die with such flair.
For this ID personally, having already announced a retreat to the second line a few days ago, I will simply choose my operations in real time based on the market's choice, rather than actively guiding the market's direction. Above 3700 points, the market can do whatever it wants and whatever capital wants—this ID can accept it all.
Regarding individual stocks, after the rotational rally of component stocks, if other stocks don't follow suit, the market trend won't be healthy. So watch whether this rotation can spread. If not, the market trend faces a turning point. The current rhythm is one-two-three: once all three lines have rotated through, see whether line one can restart. If not, the market needs a rest.
After the close this afternoon, this ID needs to make up for missed indulgences. If there's time tonight, I'll do a market review. Signing off, goodbye.
缠中说禅 2007/7/27 11:45:18
CCTV：
Who the hell do you think you are?! In this ID's classroom, there are no grandpas or grandsons!