Window-Dressing Rally, Neckline Breakout Pending Confirmation
2007/12/24 15:24:04
Ever since open-ended funds came into existence, the year-end window-dressing rally has become routine. The bulls therefore had no choice but to take the only survival path previously outlined — directly breaking through the 5209-point neckline. Now, the only thing left to wait for is confirmation that the breakout is valid. Once confirmed, the next target is the basic measured move of this double bottom, roughly around 5600 points. If it can't be confirmed, then it's back to more consolidation waiting for opportunity.
As mentioned over the weekend, the bulls' megaphones were blaring over the weekend, and from today's suddenly increased trading volume, you can tell that quite a few got suckered in. Of course, money flowing in and out is completely normal — the key is whether 5209 points can hold. If so, those who left will come back, so those who entered today don't necessarily have a big problem. However, getting rattled a bit on the ultra-short-term before 5209 holds firm is perfectly normal.
Technically, no top fractal has appeared on the daily chart, and the second hub in the 1-minute trend hasn't appeared either, so it's still a "go to sleep" situation. Of course, since this rally has been quite substantial, it's perfectly normal for this second hub to have relatively large oscillation amplitude, so be mentally prepared for that.
Technically, the most ideal scenario for the bulls would be: oscillate around 5209 points now to form the second hub on the 1-minute chart, then push up again, followed by a big dive to confirm that 5209 really holds, while conveniently expanding that second hub into the first hub on the 5-minute level. This way, the subsequent trend could develop into a 5-minute uptrend — this is of course the bullish and prudent path required. Whether it can play out depends on the bulls' capabilities.
As for individual stocks, last year ICBC and others got violently pumped at this time. Today, those PetroChina-types seem poised to pull an ICBC move again. However, the two situations are different — last year was during an uptrend, today is during a rebound. Even if the behavior and purpose are similar (after all, pumping the big ones boosts market cap quickly), the intensity will definitely be weaker. As for other stocks, it depends on the mood of the insiders — those who need their books to look better will push harder; otherwise, they'll actually use this opportunity to shake out weak hands. Year-end has always been about this petty stuff, nothing worth discussing.
Signing off, see you later.