March 13 Review - Gaming the oversold rebound with quick entry and exit, no need to participate excessively in other opportunities

1. Index Level, [TaoGuBa]
On Friday, the index retreated again. We mentioned earlier that a retest of the index was expected. The reason is simple: if the daily average trading volume isn’t enough and the rotation sectors can’t focus on a new theme every day, then each new rotation is just draining liquidity. So, if the daily volume doesn’t reach 2.8 trillion and sector rotations keep increasing, both factors combined will inevitably cause the index to decline again. Think about it: each upward move in the index is usually focused on a specific theme with sufficient daily volume to support it. For example, last September to November focused on tech sectors like optical modules, lithium batteries in November, commercial aerospace from late December to January, and then metals like gold and silver as a focus for price increases. Every upward phase in the index is driven by focused themes and matching daily trading volume.

The strongest theme currently is computing power and electricity. If the focus remains solely on computing and power, and a broad consensus forms, it wouldn’t be a problem. However, in the latter half of this cycle, themes keep expanding, such as the entire new energy sector’s wind, solar, and energy storage, which are large-scale sectors that drain liquidity. Plus, in the second half of this week, stocks related to war, petrochemicals, and others rotated in and out, further draining liquidity. This makes it impossible for computing power to focus further in the short term. With insufficient volume and no clear focus, the index will ultimately decline again.

Looking at the market now, it’s in a state of chaotic, wide-range fluctuation. A small group of leading stocks rise sharply, while most sectors rotate. Once the leading stocks have risen enough, they tend to fill the high-level gaps, repeating this cycle. For example, two weeks ago, war stocks surged, then corrected at high levels. This pattern repeats with computing power stocks, followed by another correction at high levels. Next week, high-flying stocks may continue to correct, while oversold stocks could see a rebound. If most stocks are being sold off, traders might buy the dips, aiming for quick, high-reward rebounds. The key is quick in and out—don’t think about sustainability now.

2. Sector Focus,

Currently, the market lacks volume, is chaotic, and fluctuates within a wide range without a clear focus. The index needs time to consolidate and gain space. On March 19, the US Federal Reserve’s interest rate decision is upcoming, so there’s no point in trying to identify sector trends now. It’s mostly about short-term opportunities in a few leading stocks, but overall, sector trends lack sustainability in the short term.

Therefore, it’s not advisable to focus on sector directions now, as it’s largely meaningless. Even the recently strong computing power sector is more about short-term sentiment and groupthink among top stocks rather than genuine sector-wide effects.

This Friday, the computing power sector experienced the biggest divergence since its inception. There are signs of a retreat, but unlike previous sectors like aerospace, gold, or oil, it hasn’t experienced mass limit-downs. Previously, divergences in those sectors led to large-scale declines and sharp drops in A-shares, which were very damaging. As long as Monday and Tuesday don’t see mass limit-downs and most stocks only experience minor corrections, computing power could see a strong rebound. This rebound should be traded quickly—buy low during minor dips early in the week and avoid chasing high. Once the rebound occurs, exit promptly.

Regarding sector focus, I personally don’t expect it to be so clear-cut. As earnings reports are released more frequently, and with trading volume remaining sluggish, it’s unlikely to see focused sector trends. It’s best to endure this period without trying to chase sector rotations.

3. Market Sentiment,

Market sentiment has changed significantly. Short-term traders will notice that the previous strategies—such as consecutive limit-ups, high consolidation, group sentiment, low-dip buying, and arbitrage—are no longer effective. These methods have become invalid in the current environment. Short-term trading is now very difficult. I advise against relying on past short-term tactics, as they can easily lead to deep losses.

The absence of a strong rally atmosphere means that even stocks with overnight large orders or single-day surges cannot lead the market higher. Previously, divergences provided low-risk entry points, but now most divergences are absent. Even if a stock rebounds after divergence, it’s often just a quick correction that gets absorbed by volume, leaving little room for sustained gains.

In plain terms, there’s no active short-term sentiment environment now. The only potential profit opportunities are in large-cap stocks that rise over 30%, following a pattern of strong one day, weak the next, buying low during dips. But most stocks are not strong enough to keep rising and are ready to be sold at any moment.

4. Summary,

For the index, if it drops sharply early next week, there’s a chance for a quick rebound. Currently, I recommend quick in and out—don’t try to hold for long-term gains.

For sectors, don’t focus on sector trends—they lack meaning now. The late-stage rebound stocks are random and short-lived, even in trending sectors, as volume and stability are no longer present. Expect daily fluctuations, and avoid chasing high. For computing power, as long as there’s no mass decline on Monday and Tuesday, you can consider low buying for a quick rebound, but still with a quick in and out approach.

Regarding sentiment, the market no longer has the short-term emotional environment it once did. Strategies like consecutive limit-ups, high consolidation, and group sentiment are no longer applicable. Short-term traders should take a break and wait for genuine sentiment recovery before re-engaging.

In summary, the current market environment is not friendly to ordinary retail investors. Whether in trending or short-term stocks, participation is risky. It’s better to observe more, trade less, and keep positions light. Maintain a sense of the market and avoid chasing missed opportunities. The best approach now is to wait patiently for the next phase.