Popularity Gathers Amid Turbulence

2007/7/17 15:40:05

I only made the last-minute decision not to travel last night, and the broader market also created room for another advance after yesterday's pullback. As this ID has repeatedly stated, the goal right now is to build up market sentiment through oscillation. The market — the most important thing is sentiment. As long as there's sentiment, everything else is manageable. Building sentiment, restoring confidence — this is the only thing the bulls can do under extremely unfavorable technical and fundamental conditions. And technical patterns are the result of collective forces — once sentiment changes, the collective force naturally shifts, and the technical picture will turn around.

Everyone has probably noticed that between yesterday's retreat and today's advance, the daily MACD has already formed a golden cross. Of course, this golden cross needs confirmation, but at least it gives the bulls a glimmer of hope in what was a completely unfavorable technical landscape. The effort to secure this glimmer has been brutally difficult.

Currently, all short-to-medium term moving averages are bunched around 3900, which technically creates perfect conditions for a directional move. Now, as the saying goes, everything is ready — we only await the east wind. And that east wind is the materialization of certain bearish factors. Right now, the market needs certain bearish events to materialize so the shoe can finally drop — so the bears can stop endlessly hyping the bearish factors that even Martians know about. Once materialized, it's done. Sentiment and price action can then form a positive feedback loop favoring the bulls. Once this positive feedback loop forms, the bears can go cool off on the sidelines.

Of course, as this ID has consistently emphasized, right now everything favors the bears. The bulls' current effort is creating something from nothing, going against the grain — the difficulty is self-evident. The road is long, but as long as someone walks it, as long as someone has already started walking, the road will eventually be paved. As for policy, once price action and sentiment return, policy can change too. Policy is merely one component of the collective force. Policy doesn't fall from the sky — it cannot be divorced from reality. So what the bulls are undertaking now is a grand systems engineering project: completely reversing the situation in terms of technicals, sentiment, psychology, policy, and every other dimension — transforming what was entirely favorable to the bears. As this ID said early on: as long as there's even a 1% chance, 100% effort must be given.

On individual stocks, this ID has already made it abundantly clear multiple times: there are two categories. The first is CSI 300 constituents — these will exhibit rotation. For example, real estate moved today; in a few days it might be something else. That's rotation. Rotation is the basic method for building sentiment — this has been explained very clearly before. The second category is fully adjusted mid-to-low-priced stocks with themes and potential. For these stocks, as this ID has also mentioned, accumulation and repositioning are currently underway — positions should be built dynamically.

Of course, if this bull effort fails, the constituent stocks face significant catch-up decline risk — this must be noted. However, who says the bulls must fail? Why can't the bulls achieve a great victory, with constituent stocks then staging another magnificent rally? This ID is in the thick of it and can't — and needn't — say more.

Have other matters to attend to. Must sign off. Goodbye.