A Step That Both Bulls and Bears Must Take Back.
2007/7/16 15:43:17
As I already said last Friday, the release of macroeconomic data this week would introduce uncertainty into the market's development. Over the weekend, all news pointed to the worst-case scenarios for this data. Under such circumstances, stubbornly holding at the neckline became utterly pointless — it would only waste effective forces in a meaningless battle. This data, in essence, exists only to let the other shoe drop. Right now, every earthling knows about those few bearish factors. If they don't land, the market's development will become uncontrollable. Regardless of whether you're bullish or bearish, this step back is one that must be taken.
Now, we are indeed at a stage of major bull-bear confrontation. This ID has stated very clearly: from a purely technical perspective, the bears hold an absolute advantage. From a macro perspective, the bears also hold an absolute advantage in the short term. This is exactly why this ID has been emphasizing that the road ahead is long. What we need now is continuous ambush warfare, positional warfare, and assault warfare — constantly wearing down the bears' strength, using fluctuations across different ranges to sort out both chips and sentiment. This is a brutal and protracted process.
This week, leveraging the release of macro data, the bears' energy has been and will continue to be powerfully released. How to use this energy against itself — to absorb the bears' outburst with minimal expenditure — is the most important problem confronting the bulls in the short term. And today's market action was precisely an indispensable step in that solution.
Tomorrow I may need to make a trip to Shenzhen for business — the details aren't finalized yet. If I leave in too much of a rush and can't post market commentary, please forgive me. I'll make it up when I have time. As for retail investors' operating principles, this ID has already repeated them many times: don't concern yourself with how the market's resultant force is composed — just focus on the trajectory that the resultant force draws. Trade according to the chart, and don't be influenced by anything else. For short-to-medium-term traders with weak technical skills, there's no need to buy into the market until the 5-week moving average is firmly recaptured. For medium-to-long-term investors, you can continue using market declines as opportunities for phased position-building in the two categories of stocks previously mentioned.
Since I may be traveling, posts may not be regular for several days, so today I can answer questions until 4:30.
Replies
缠中说禅 2007/7/16 15:52:41
[Anonymous] Sina User
2007-07-16 15:47:36
The government is preparing to launch a CSI 300 index fund on the Hong Kong market. This move essentially hands the pricing power of the mainland A-share market over to international capital! It's like handing them a weapon!
Is the mainland A-share market a second-class market? Are mainland Chinese people second-class citizens?
In the future, perhaps even this year, regulators will launch stock index futures. This way, international capital can push down red-chip stocks in Hong Kong while simultaneously shorting the A-share index!
I'm speechless. Mainland Chinese people will forever be fish and meat — forever the objects of slaughter! What does "sharing the fruits of reform and opening up" even mean?
After thinking seriously all afternoon, I've decided to leave the market and focus on running a real business!
Once the heart is wounded, it's hard to heal in a short time.
==
Mishandling the capital markets will directly impact real industry. World economic history has repeatedly proven that many economic crises, in hindsight, were man-made.
缠中说禅 2007/7/16 15:53:39
[Anonymous] Sina User
2007-07-16 15:51:41
Hello host, I read your articles every day and have benefited greatly. Words cannot express my gratitude.
I'd like to ask a question that's perhaps a bit basic — please don't laugh: For a retail investor, how many individual stocks is it appropriate to hold simultaneously? Is it related to the size of one's capital? What about with 500,000 yuan?
=
No more than 3.
缠中说禅 2007/7/16 15:57:31
[Anonymous] 路人甲
2007-07-16 15:54:44
A long time ago you said steel is this year's non-ferrous metals, but so far this year it seems like non-ferrous metals have been much stronger. What about steel — is there any hope? I'm holding Baosteel, which has nearly the lowest P/E ratio in the entire market. Looking at the daily chart, the pattern is clearly a hub bottom — during declines, MACD shows only a very short bar, clearly a bottom consolidation divergence. Plus there's half-year line support. How come it just won't go up? Am I wrong?
==
Think back to how non-ferrous metals moved last year, and you'll understand why steel is behaving this way this year.
缠中说禅 2007/7/16 15:59:18
[Anonymous] Sina User
2007-07-16 15:57:54
Hello! May I quietly ask — in an upward trend, is the hub structure down-up-down? New student here, thank you!!
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Strictly speaking, in standard decomposition, you can think of it that way. But first you need to understand the relationship between the associative law and the diversity of decompositions.
缠中说禅 2007/7/16 16:00:10
Little Fish Who Loves to Laugh
2007-07-16 15:58:21
Teacher, please advise on how to mark 1-minute trends on a 1-minute chart. Must there be a sub-level connection between two 1-minute trends?!! Eagerly awaiting your reply!!!!!
==
Please re-read the chapter on fractals, strokes, and line segments until you understand it thoroughly.
缠中说禅 2007/7/16 16:01:48
[Anonymous] 星空
2007-07-16 15:59:21
==
Mishandling the capital markets will directly impact real industry. World economic history has repeatedly proven that many economic crises, in hindsight, were man-made.
Will an economic crisis erupt? That's terrifying.
What should we do right now to prevent its impact?
==
Everything is the result of the resultant force. One more unit of force could lead to a completely different outcome. That's why this ID must do something.
缠中说禅 2007/7/16 16:02:50
[Anonymous] Sina User
2007-07-16 16:01:22
Teacher, you're still here? Teacher, are there no more new lessons?
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I'm sorry — I've been too busy lately and haven't had time to write. Besides, many people seem to not have grasped the previous material well, so taking a pause to let everyone digest is probably a good thing.
缠中说禅 2007/7/16 16:04:02
[Anonymous] 人间几年
2007-07-16 16:02:44
Hello host, I'd like to ask about something that's puzzled me for a long time: On a larger level, there's an obvious divergence, but on a smaller level, the trend keeps extending. On MACD, the red bars have already shortened to nothing, with the fast and slow lines moving flat or gradually declining, yet prices keep making new highs. How should one operate in this situation? If you exit based on the larger level, when do you get back in? Without lowering your operating level, that is.
==
Please understand the relationship between divergence and divergence segments. Only then will you understand the use of the nested interval method. Once you understand that, your question will no longer be a question.
缠中说禅 2007/7/16 16:05:25
[Anonymous] 兰兰
2007-07-16 16:03:01
Sister, if you ever come down south, try "chicken beak lychee" and "concubine's smile" — the flesh is thick and plump, really delicious!
=
Sure, thank you.
缠中说禅 2007/7/16 16:08:02
[Anonymous] 大盘
2007-07-16 16:05:22
May I ask: on a 1-minute chart, can a long period of narrow sideways movement with 2-4 candles oscillating up and down from a certain starting point constitute a stroke? Is this similar to the situation where extension beyond 9 segments leads to expansion?
Thank you
=
No, it cannot. Between the top and bottom, there must be at least 1 candlestick that does not entirely belong to either the top or bottom — meaning that candlestick must have at least some portion that belongs to neither the top nor the bottom.
缠中说禅 2007/7/16 16:08:56
[Anonymous] 一生中最爱
2007-07-16 16:07:25
The teaching articles from before used many 1-minute candlestick charts from that time (several months ago), which can no longer be viewed. Could you provide some replacement chart examples?
Thank you
==
The most thorough way to learn is to clearly understand the concepts — only then can you freely handle any chart.
缠中说禅 2007/7/16 16:11:06
Stone Three
2007-07-16 16:09:03
Boss, are stocks near the annual moving average safe? Isn't the downside relatively limited? But I'm also worried — could it be a case of the weak getting weaker?
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It's not that being near the annual line automatically makes a stock good. This ID has made it very clear before: what matters is stocks near the annual line that show signs of new capital entering — this is easy to spot from the trading volume.
缠中说禅 2007/7/16 16:12:57
[Anonymous] optimalsh
2007-07-16 16:09:43
Teacher, this is my first question, please be gentle.
I'd like to ask about warrants — mainly the put warrants and their bizarre price action. Is there excessive speculation?
==
If you're capable of playing put warrants, then you should have a certain level of technical foundation. Otherwise, why would you play put warrants? In all things, one must act within one's capabilities.
缠中说禅 2007/7/16 16:14:46
[Anonymous] 不想飞
2007-07-16 16:12:01
Sister Chan, I'd like to ask about the magical origin of hubs composed of three line segments. First time asking — hoping you can reply.
=
The greed, anger, and delusion of all people.
缠中说禅 2007/7/16 16:17:19
[Anonymous] 三次求解
2007-07-16 15:59:14
Again seeking clarification on judging line segment breaks:
After carefully reading the lesson text, the concept of strokes, and the example charts the host drew, I found that it seems possible to judge line segment breaks in a simpler way, but I'm not sure if it's correct. Please correct me:
In a downtrend, let some point be E. When two consecutively higher points appear after E, the downward segment is broken, and E is the endpoint of that segment. The reverse applies for uptrends.
Thanks.
=
That's only the most standard case. Under certain special circumstances, line segments can also form triangles, running patterns, etc. These will all be covered in later lessons.
缠中说禅 2007/7/16 16:18:57
[Anonymous] 缠中解馋
2007-07-16 16:17:21
Since I'm a beginner, I can't ask technical questions, so I'll ask about a specific stock: 569 normally has very small fluctuations with no spread to trade. Today it broke down again — should I cut my losses?
Please reply! Thank you!!!
Please please please please please!!!!!!!!!!!!
==
Trade based on larger levels. Don't sit staring at the intraday chart all day. With current transaction costs, intraday charts have virtually no operational significance.
缠中说禅 2007/7/16 16:20:30
[Anonymous] 水房姑娘
2007-07-16 16:17:41
Chan M, many individual stock prices are already below where they were at 3,000 points. At this point, how much further can they really fall?
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For retail investors, the first thing to understand is: don't predict tops or bottoms. What's fallen can fall further; what's risen can rise further. The key is to read the chart and see whether there are buy or sell points at your operating level.
缠中说禅 2007/7/16 16:21:05
Honestly Chanting Buddha
2007-07-16 16:19:53
Chan Master, the hub is 3, expansion is 9 — is this related to the I Ching? Thank you!!
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No relation at all. It's only related to the associative law.
缠中说禅 2007/7/16 16:24:08
[Anonymous] Sina User
2007-07-16 16:16:18
Boss, you've worked hard. Life is really tough right now.
==
If you have a deep understanding of the stocks you've bought, there's nothing to panic about. The key is that when you buy, you must know why you're buying. If you don't know, then you absolutely must not buy.
缠中说禅 2007/7/16 16:25:42
[Anonymous] Sina User
2007-07-16 16:23:04
Hello,
May I ask: for the 3 candlesticks forming a top or bottom, the highest or lowest points cannot be equal, correct? You must first merge inclusion relationships, then determine tops and bottoms, right?
==
Please understand the inclusion relationship clearly.
缠中说禅 2007/7/16 16:28:20
Honestly Chanting Buddha
2007-07-16 16:24:40
Chan Master, can divergence continue?
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Please understand the difference between divergence segments and divergence. What can continue is only a divergence segment. The continuation of a divergence segment may ultimately lead to the divergence segment's invalidation. So-called divergence is essentially a successful divergence segment — and once it's succeeded, there's no question of continuation.
缠中说禅 2007/7/16 16:29:57
[Anonymous] Sina User
2007-07-16 16:27:35
Where's the support level below?
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Don't think about support and resistance — these are tedious concepts. This ID loves using support and resistance to play fake-out moves. Of course, it's not just this ID who enjoys doing that.
缠中说禅 2007/7/16 16:31:31
[Anonymous] Sina User
2007-07-16 16:28:53
Chan Master, you said the first sell point is something to watch for starting from the second entanglement. But current stocks (e.g., on a 5-minute chart) generally just start oscillating repeatedly after the first entanglement, without making new highs, and then head down. Doesn't this contradict the definition?
I'm not sure if I'm misunderstanding something, or if there's an error somewhere.
Awaiting your reply, thank you.
==
Please read through the later lessons. "Entanglement" is just a figurative representation of the moving average system — it has no essential connection to the later lessons.
缠中说禅 2007/7/16 16:38:00
I'm sorry, I need to go now. If I get back early tonight, I'll write a new lesson, but I can't promise anything right now. I'll try.
Goodbye.
缠中说禅 2007/7/16 15:46:24
Since I may be traveling, posts may not be regular for several days, so today I can answer questions until 4:30.