Medium-Term Technical Analysis of the Market

2008/1/31 18:44:04

Done with the meeting—that person rushed off to catch a flight. Made a special trip just for this; couldn't refuse. Painful—yet another tedious affair added to the pile. Back now, let me write the post before eating. This ID just can't eat in peace without finishing promised tasks.

The closing post was non-technical, purely straight talk—it addresses what must be said about the forces behind the trend. But operationally, you still must follow the technicals, so technicals come first. We can use words to prod the component forces, but this must not blind the technical eye. Especially for ordinary retail investors—besides the charts, which you see at the same time as everyone else with perfect fairness, what else can you rely on?

It still relates to 3600—why? Because the Shanghai index has been tied to this from the very beginning. For example, the 45 points in the early 1990s, the 2245 points in 2001, and this round of market action is equally related.

The 530 event at 4335 points and the high at 6124 points—the difference is basically 1800 points. The first target down at 4778 points was 3/4 of 1800 points. So now, we've reached this 1800-point level, making this position very important—and it relates to the annual moving average. The 1200-point drop from 5522 also lands at this position, so multiple factors converge here, making it technically very significant.

Since this decline has already touched 4335 points, a daily-level hub is already forming, with the area around 4335 being an inevitable part of this hub. This hub is the first daily hub since the rise from 1000 points, so it will influence at least many months of market movement.

In other words, from a medium-term perspective, a large daily-hub oscillation has already formed. The amplitude of this hub oscillation is based on 3600 points—1800 points above, and symmetrically, it can go 1800 points below. That is, even if it drops to 2500 points, it's still within the range of this hub oscillation.

With this large hub oscillation structure established, we have a very macro-level grasp of subsequent market movement. Obviously, the middle position of this current hub will be revisited repeatedly over a very long time. Levels like 2500 and 6100 are analogous to those momentary oscillation positions like 580989 at 0.976, while the current position is like 580989 around 0.6 recently—a position that will be visited repeatedly until this hub is broken.

This hub oscillation can be gridded at 450 points (1/8 of 3600): above, 4778 is the first resistance line, 5228 is the second, and the positions below follow the same pattern. Of course, in detailed analysis, you can subdivide the 450 further, which has some significance for short-term trading.

Since this is currently a daily-level hub, the maximum deviation level would be 30-minute. If there's a 30-minute downward deviation, that would constitute the best medium-to-short-term opportunity. Similarly, 5-minute deviations also create good short-term opportunities. And of course, if you're an ultra-short-term trader, you can also watch for corresponding 1-minute deviations.

Over a sufficiently long period, all market opportunities will be triggered by oscillation deviations from this hub. Combined with the internal structure charts of 30-minute, 5-minute, 1-minute, etc., you'll be like a fish in water during this large-scale oscillation.

This ID said long ago: this year, as long as you can handle oscillation, you'll absolutely make no less than last year. With such a large oscillation chart, opportunities to extract blood abound—seize them well.

Whether the market before and after the holiday can rely on the annual moving average and hub central axis to produce a hub deviation toward 4778—tomorrow will give a preliminary answer. If it can hold at the current position, oscillate above the 5-day line, and Monday doesn't bring bad news like the previous two weeks, then the foundation for such a deviation exists. Otherwise, it absolutely needs to first hammer out a bear trap before playing this game.

Note: this ID always has full confidence in the market. But this ID's confidence is not the perma-bull kind that insists on going up. This ID's confidence is in extracting blood from oscillations. That naive behavior requiring one-directional rallies to make money? This ID has no interest in entertaining.

What this ID lacks confidence in are matters outside the market. As long as this ID is interested, a bear market can be played just as happily—let alone an oscillating market. But matters outside the market—this ID truly lacks confidence there, and those outside matters are what this ID truly worries about.

This ID said early on: for this ID, what difference does it make how the economy turns out? But for most people, the economic trajectory is far more important than the stock market.

This ID hopes every Chinese person has their own bread. What this ID worries about day and night is that China's thirty-year great economic rally could be interrupted by some naive factor—beyond that, this ID has nothing to worry about.

If the great rally is interrupted, this ID can still enjoy the pleasures of wine and romance, shamelessly but economically waiting to bottom-fish at the tail end of a great economic decline. But what about everyone else?

Enough—time to eat. Whatever will be, will be. Ten thousand ages of clouds and sky, all in one cup of wine.