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On the Medium-Term Evolution of the Market

2007/11/6 8:38:52

Got back too late yesterday to write a post—apologies. Mainly a sudden large PE project came up, the other party sent people over. An initial investment of at least 500 million, listing by early the year after next at the latest. If successful, it'll be N times more classic than Western Mining. So this ID couldn't exactly be rude about it. Things are genuinely tight right now—in terms of scheduling, that is. Next week there's another business trip, but this ID will try to keep up with daily market analysis and posts. If occasionally that's not possible, please forgive me.

Was planning to write a lesson, but no time now, so let me discuss the market's medium-term trajectory. This ID has actually said this repeatedly. Just summarizing it in one go so everyone is clearer and doesn't get confused by the market action again.

  1. 6100 points is one peak of the market's medium-term top. Now the market is forming the second peak. Whether the 6004 seen a couple of days ago is it—that requires a break below the 5555 neckline to confirm.

  2. Before an effective break below the 5555 neckline, operate everything from the perspective of hub oscillation: sell on upward trend divergence, just like the other day; if it drops back without breaking 5555, you can buy back. Keep doing this back and forth until the market chooses its final direction.

  3. The possibility of the market choosing an upward direction still exists—the variable being futures. Now that PetroChina has come back, the index is even less meaningful. In fact, from the perspective of other stocks, many have already completed genuinely mid-level adjustment magnitudes. Stocks that recently dropped 30%-50% are quite common. So with futures in the picture, the index will become increasingly distorted.

  4. Because index distortion is growing, paying attention to individual stocks matters more. Year-end will be the stage for three types of stocks: First, the "China-prefix" stocks—whether hammered or pumped, the action will be non-stop spectacular. Second, theme stocks where accumulation is complete or nearly complete will grow stronger through oscillations, taking the lead in launching next year's market. Third, stocks where holdings are insufficient and more accumulation is needed will use every oscillation to keep pressing down, until the needed positions are obtained.

  5. Based on the different stock types, choose your operating approach. You need to watch the broader market, but pay even more attention to the type of stock you're facing and its movement characteristics relative to the index.

  6. December is the 30-month time window. If a low point appears around that time, next year's rally will launch from there. If it's a high point, then early next year will face significant pressure. This is also why this ID has been trying to suppress the market recently—to approach the time window with a low point, preparing for next year's rally.

  7. First establish your big-picture thinking. Another reminder: since index distortion is becoming severe, please focus more on which of the above-described types your own stocks belong to. For "China-prefix" stocks, you can reference the index movement more. For theme stocks, examine the relationship between their movement and the index—see if the players inside are using the index to scare you or to fool you. Once you see through it, your operations become clear.

  8. Operations are your own—like drinking water, only you know if it's hot or cold. Go cultivate yourselves. What a wonderful market, what a wonderful practice.