1. Time Dimension: Timing and rhythm of market declines
Consolidation and top area:
Top area: The main capital usually starts to "distribute" when prices approach historical highs. At this time, the market may enter a long-term consolidation phase, often accompanied by decreasing volume. The main capital uses repeated ups and downs in this area to wash out, distribute, and attract retail investors to take over. Generally, this phase lasts a long time and continues under an unclear trend, leading most investors to believe that the market has not yet peaked, causing retail investors to feel fear.
Periodic high points: The main capital usually pushes prices to critical points at important time nodes (such as quarter-end, year-end, economic data releases, etc.) to create short-term market panic and distribute. At this point, retail investors mostly "do not understand," believing the market will continue to rise, allowing the main capital to sell stocks or cryptocurrencies at high prices smoothly.
Downward initiation and acceleration:
Time compression: When the market rises, the main capital often pushes prices up slowly, while declines happen more rapidly and in shorter time frames. The beginning of a decline is usually when the main capital quickly suppresses prices through sudden adverse news, black swan events, macroeconomic data, etc., creating panic. A "waterfall-like" decline occurs during market downturns, characterized by significant pullbacks in a short period.
Bottom area:
As the market declines to a certain stage, the main capital begins to show "stop-loss signals." At this stage, the main capital often starts to accumulate chips at low levels, the speed of price decline slows down, and the time becomes longer. This stage is often accompanied by low-volume fluctuations, and market sentiment gradually begins to recover. The main capital prepares for the next round of increases through long-term accumulation at low levels.
2. Volume Dimension: Changes in market supply and demand and capital flow
Volume at the initial stage of decline:
In the initial stage of a decline, trading volume is usually large, indicating a significant amount of selling in the market. The peak volume at this time often represents a concentrated outbreak of market panic, with the main capital forming a panic sell-off through increased volume. Retail investors may incur significant losses at this time, while the main capital takes the opportunity to absorb cheap chips. During this stage, market sentiment will be particularly low, and many investors will begin to question the market trend, feeling the urge to cut losses.
Volume shrinkage:
As the market gradually approaches the bottom, trading volume often decreases. This is because most retail investors have already panicked and exited during the decline, leading to a balance of buying and selling power in the market. At this point, the main capital absorbs at low levels, and volume typically shrinks, but this is also a precursor to a reversal. The shrinkage of volume indicates reduced selling pressure in the market, beginning to enter a consolidation phase. If coupled with favorable news or economic data, prices may gradually rebound.
Confirmation of volume during a rebound:
If the price rebounds with gradually increasing volume, it indicates strong buying support in the market, and the rebound could potentially become a trend reversal rather than a false breakout. Therefore, investors need to pay attention to changes in volume during the rebound process. If the volume is insufficient during the rebound, it means the market demand is weak, and the price increase may only be a temporary correction, with the possibility of a further decline at any time.
3. Price Dimension: Judging the true trend of market prices
Changes in price trends:
During the upward phase, prices gradually create new highs, and market bullish sentiment is high. The increase in prices drives capital inflow into the market, forming a strong upward trend. The main capital controls the pace during the rise to avoid a too rapid increase. In the downward phase, prices first break through important support levels, especially forming breakouts at significant technical support, moving averages, or historical price support positions. At this time, the main capital triggers panic selling in the market by breaking through key support levels, accelerating the price decline.
False breakouts after a breakout:
During the decline, the main capital sometimes creates false breakouts. When prices break below key support levels without volume support, or if prices quickly rebound in a short time, the main capital often creates false breakouts to mislead the market into thinking it has entered a bear market, enticing more investors to cut losses while the main capital seizes the opportunity to accumulate bottom chips.
Important support and resistance levels:
During the market's decline, investors need to pay special attention to important technical support and resistance levels. The main capital will conduct carefully designed operations near key positions. If prices break below key support levels and decline with increasing volume, it indicates strong short-selling power in the market, and further declines may occur. Conversely, if prices stabilize near support levels with decreasing volume, the main capital may seize the opportunity to counterattack, increasing the chances of a reversal.
4. How to determine when to exit at the top and when to bottom fish
Timing for exiting at the top:
The key to exiting at the top lies in "increasing volume and slowing price momentum." When the market encounters unclear economic data, policy changes, or enters an overly optimistic phase, the price increase begins to slow, but trading volume remains high, indicating that the main capital is rapidly distributing. At this time, investors should decisively choose to sell to avoid being "caught" by the main capital.
Another way to exit at the top is to wait for technical signals from the market, such as prices breaking through long-term support levels or showing obvious price divergence signals. Technical analysis often reflects market changes in advance.
Timing for bottom fishing:
The best timing for bottom fishing is when prices have continuously declined and volume has significantly shrunk, with market panic reaching its peak. At this point, the main capital begins to accumulate chips; although prices may not immediately reverse, one can gradually enter low positions.
When prices touch long-term support levels and show signs of a rebound, there is a high chance for bottom fishing. This needs to be confirmed with volume to ensure the rebound has support.