Making Money Depends on Individual Stocks, Not the Index

2008/2/21 15:18:25

Happy Lantern Festival everyone. There will be no post tonight since it's a holiday — apologies.

Today, yesterday's rumors were confirmed. In modern society, there's rarely smoke without fire, especially in capital markets. The index barely maintained the hub oscillation at 4575. This 5-minute hub is confirmed, and the key going forward is the third buy/sell point issue.

Since the big players all love to open their lion-mouths wide, everyone has no choice but to steer clear. The index can't produce any tricks, but that doesn't mean opportunities to make money are fewer — making money depends on individual stocks, not the index. As already clearly stated in last year's outlook, this year belongs to theme stocks. And right now, as mentioned yesterday, it's about lighting fires everywhere and getting sector rotation going.

Today, from venture capital to chemicals, pharmaceuticals, new energy, and so on — they all got lit up once. Whether this sector rotation can get going is hard to say yet, because human factors are currently very significant. But if only the fire-starters are busy, in the end there won't be a prairie fire. And if the fire can't spread, the fire-starters will have worked for nothing.

For the index, the most miserable scenario is another smash to the bottom, but stocks with themes would probably just have a courtesy wash at most. You see — there are already quite a few stocks making new highs. There's not much point wrestling with the index — better to wrestle with individual stocks instead.

Note: when wrestling with individual stocks, pay attention to rotation. Once a sector has rallied, there's no need to chase it higher. If you're going to buy, buy the ones that haven't launched yet but have new capital paying attention to them. In the current market, nothing has high sustainability. When the momentum goes wrong, you can run, and after running there will still be countless stocks waiting to be bought. There's absolutely no such thing as missing the boat right now.

Of course, those without this level of skill should just hold tight to stocks that will definitely rise in the medium term and stick to their specific sectors. Those who can rotate will make 500%; those who can't and just hold will make 50%. This world is very fair — skill matters a lot. If you don't have the skill, don't be envious.

The function of hubs was demonstrated classically again today on 580989 — see how thrilling the pullback was after moving far from the hub. Not quite as dramatic as the 0.976 time, but still somewhat classic.

Signing off first, see you later.