3/9 Retrospective Notes

Today was truly an exciting day. We saw Brent crude oil surge by 20 dollars in a single day, reaching a high of 120. This 120 is the highest point since 2022. It only took about 7 days to break through, rising from 70 to 120 in just over a week—really aggressive. This also reflects the huge volatility in the international situation. Currently, global markets—whether stocks or futures—are all driven by news. Markets are jumping up and down with each sudden piece of news, making it very difficult to trade successfully and catch the right rhythm. Today’s big rally might get you in, only to be trapped the next day; a big drop today might force you to cut losses, only for the market to rebound sharply the following day. For example, looking at Japan and South Korea’s stock markets, they both experienced big declines today, dropping another 5 points, showing the whipsaw effect. So, global markets are hard to trade right now—not just the Chinese A-shares, but everywhere—mainly due to the war. [Taoguba]

Back to crude oil: today, futures markets pushed oil prices up to 119.5. In the short term, Brent faces two resistance levels: one at 120 and another at 140. But after 1 pm today, oil started to fall sharply, dropping to around 105. Let’s first discuss why it rose. The reason is simple: everyone knows it’s because of the ongoing conflict between China and the US + China and Israel, which has not eased and even intensified over the weekend. Both sides have started targeting each other’s refineries and oil storage tanks—this is fundamental. They’ve begun bombing each other’s infrastructure, indicating escalation. The Strait of Hormuz remains essentially closed, and after the US’s oil tankers were attacked, other countries are now hesitant to pass through. Only China’s oil tankers might still go through. This market expectation is that the conflict will continue, and the Strait probably won’t open in the short term, making it difficult for Middle Eastern oil to flow out, constraining global oil supply. When supply is tight, oil prices rise—everyone understands this.

But why did oil prices start to turn down after approaching 119.5? Because of negative news. The first is that the G7 is preparing to release strategic reserves to stabilize prices and suppress the surge. However, none of the G7 countries are major oil producers; their reserves are limited—mainly the US has some. So, this news is a cold shower for the rapid rise in oil prices. Plus, the quick increase already allowed profit-taking, so once this news broke, traders who had gains would rush to exit. That’s why oil quickly fell from 119 to around 105. I personally think this is just a minor negative for oil, not a fundamental change. The real driver remains whether the US and Israel will negotiate. As long as there’s no negotiation, the conflict persists, and infrastructure continues to be targeted, which supports higher oil prices. That’s the core reason for oil’s rise. So, I believe this negative news is not significant; after profit-taking, oil will likely continue to rise.

The second piece of news is that the US is considering allowing the UAE to export oil to other countries. Previously, the US didn’t permit other nations to buy UAE oil—especially India, which was threatened because it acts as an intermediary, buying UAE oil and reselling at a profit. The US was against this. But now, the US is easing restrictions and even considering allowing UAE to sell oil abroad to ease the current surge.

The UAE has many floating storage tankers on the ocean—like mobile oil depots. Countries can request oil, and the UAE ships it directly. Otherwise, the oil just floats at sea, like a floating oil market. The US has been sanctioning Russia mainly to suppress its oil exports. Now, with the US and Iran fighting, it’s a boon for the UAE—endless oil supplies can be exchanged for US dollars. The UAE is probably ecstatic. Oil prices are still very high, and this wave will likely make the UAE huge profits. They know that as long as the war continues, they can keep selling high-priced oil. If you’re the UAE, would you support Iran continuing to fight? Probably yes. They will keep supplying weapons and aid to Iran, encouraging the conflict, because the value of those weapons is just a small part of the profits from oil sales. The US and Iran’s ongoing fighting also distract Europe, making it less focused on Ukraine. The UAE is the happiest, as they benefit from both sides.

I now suspect that the US’s “yellow hair” (a nickname for certain US policymakers) secretly reached some special deal with the UAE—allowing the UAE to sell oil globally, with the UAE increasing US debt holdings in return, since US debt is their lifeline. The US is very shrewd and profit-driven, so this is possible. Also, the US doesn’t want oil prices to stay high, because that would hinder their rate cuts. Their national strategy conflicts with high oil prices. So, they’re forced to allow the UAE to sell oil freely to suppress prices.

Tonight, oil prices have already risen again. Drivers will notice higher fuel prices—this directly affects people’s livelihoods worldwide. That’s why, after oil prices rise, related sectors like chemicals and agricultural products also go up, because higher oil costs push transportation and raw material costs higher. This, in turn, boosts stock prices of related companies. This is the logical sequence and proven pattern of commodity markets. When oil rises, everything else tends to fall or be squeezed—this is market law.

In summary, today’s oil surge and subsequent pullback were driven by news, but I believe the impact is only short-term. As long as US and Iran don’t negotiate, the fundamental logic for oil to rise remains intact. I remain optimistic about oil fluctuating upward. Correspondingly, sectors like non-primary industries and certain tech stocks are likely to fluctuate downward because they are inversely correlated. For example, coal and chemicals in the secondary sector are relatively stable—coal rose quite a bit today. Agricultural products in the fourth tier will also catch up with oil. But other sectors, especially those already at high levels like non-ferrous metals and tech, may not fare as well. Last weekend, I shared a view on non-ferrous metals; today, during oil’s big rally, Japan and South Korea’s markets plunged, while China’s A-shares held up better but still declined significantly—proof of the “oil rises, everything falls” theory. As long as US and Iran don’t negotiate, I expect oil to fluctuate downward, which means I’m bearish on non-ferrous metals and tech sectors in the short term. This isn’t personal emotion but a rational conclusion based on historical experience.

Regarding the index: today, it retested the previous support at 4050, then rebounded. It’s okay for now, but I think the key support for the Shanghai Composite is at 4000 points. Due to the war impact, 4050 could break at any time. Looking at volume: today’s trading volume was still shrinking—about 2.6 billion yuan overall. The morning volume was decent, but it continued to shrink in the afternoon. On the daily chart, the index hit a new high of 4197 on March 3, but that day was a volume-down bearish candle. March 4 was a gap-down opening with a volume-inverted doji. March 5 was a volume-shrinking doji, and March 6 was a small-volume bullish candle. Over these five days, after peaking at 4197, the index mostly declined with volume, with only one bullish day on the 6th, which had the lowest volume among those five. This pattern—declining on high volume, rising on low volume—suggests no reversal yet. The recent decline from 4197 is still within a correction, not a trend reversal. I believe the index is still in a pullback phase, not a bottoming. The strong support remains at 4000 points. Just for reference.

Looking at the non-ferrous metals sector: today, it also showed a small-volume bullish candle, not a volume spike. I think this sector may continue downward, possibly bouncing with oil’s decline in the short term. But long-term, the best buy point is when the sector’s volume surges and it breaks above 13,000 points—then it’s a strong buy signal. Currently, the sector remains high, and with ongoing war and soaring oil, it’s still a negative environment for metals. I believe each rebound now is a chance to exit for long-term investors. If you think the war will end soon and oil will drop back to 70, ignore my view and hold or add positions.

If the non-ferrous metals sector breaks below 9,900, a large M-top might form. Even if you don’t want to reduce holdings now, you should do so if support breaks. Personal opinion, for reference only.

Long-term, the recent sharp decline in non-ferrous metals can be seen as an opportunity. Many stocks will fall with the sector, but a few with strong fundamentals and deep moats—like Huayou Cobalt, Green Eco—will stand out. When they retrace to certain levels, their valuation will become attractive again. Their good performance and deep moat mean that after the Iran-US conflict ends, these stocks will rebound and catch up. This is normal market value correction. So, short-term bearishness on metals doesn’t mean long-term pessimism. When stocks reach a good valuation zone, they will turn bullish again. The current decline is mainly due to the Middle East war and oil surge, which is normal.

I emphasize: my analysis is based on current market conditions. If you believe the war will end soon and oil will fall back, then hold or add. If you think oil will stay high, then ignore my view and keep your positions. I can’t predict how long the US-Iran conflict will last or when negotiations will happen. So, take my analysis as a reference. If you think it’s rubbish, just laugh it off. No problem.

Back to the indices: today, the Shanghai index retested the support at 4050, then rebounded. It’s okay for now, but I think the key support is at 4000 points. Due to war effects, 4050 might break at any moment. Volume today was still shrinking—about 2.6 billion yuan. The daily chart shows that after hitting 4197 on March 3, the index was met with volume-down bearish candles for three days, then a small-volume bullish candle on March 6. The pattern suggests no reversal yet. The index remains in a correction, not a reversal. The support at 4000 remains strong. Just for reference.

Looking at the non-ferrous metals sector: today, it showed a small-volume bullish candle, not a volume spike. I think it may continue downward, possibly bouncing with oil’s decline short-term. But long-term, the best buy point is when the sector’s volume surges and it breaks above 13,000 points—then it’s a good buy. Currently, the sector is high, and with ongoing war and high oil, it’s still a negative environment. Each rebound now might be a chance to exit for long-term investors. If you believe the war will end soon and oil will drop to 70, ignore my view and hold or add.

If the sector breaks below 9,900, a large M-top could form. Even if you don’t want to reduce now, do so if support breaks. Personal opinion, for reference only.

In the long run, the sharp decline in non-ferrous metals can be an opportunity. Stocks with strong fundamentals—like Huayou Cobalt, Green Eco—will eventually rebound. When they retrace to certain levels, valuation will be attractive again. Their good performance and moat mean they will recover after the conflict ends. This is normal market correction. So, short-term bearishness doesn’t mean long-term pessimism. When stocks reach a good valuation zone, they will turn bullish again. The current decline is due to the war and oil surge, which is normal.

I stress: my analysis is based on current market info. If you believe the war will end soon and oil will fall, then hold or add. If you think oil will stay high, ignore my view. I can’t predict the duration of the conflict or negotiations. Take my analysis as a reference. If you think it’s rubbish, just laugh it off. No problem.