SMM7 March 24: at the 15th lead and Zinc Summit 2020 held by SMM, Ma Hongjian, chairman of Yunnan Zhenxing Industrial Group Co., Ltd., looked for the main contradiction and fragility of the lead market from three aspects: traditional market analysis methods, facing contradictions: looking for the main contradiction and fragility of the market, and the observation is greater than the prediction.
1. General forecasting methods of lead price: inductive method and deductive method
Around the beginning of April this year, the epidemic was still spreading overseas, and commodity prices as a whole fell sharply, with all kinds of metals falling to nearly five-year lows. Carry on the information collection based on the market environment, carry on the linear extrapolation to the market price. When everyone can see pessimistic news, it can be summed up that the price will be lower, which is called induction in methodology. Using induction, it is easy to see lower when falling and higher when rising. But the market is not linear, when the whole market is going to reverse, it is not easy to see it by inductive method.
In addition to the inductive method, there is also a deductive method to predict the market price. The deductive method mainly starts from the supply and demand, dismantles each link of the lead industry chain, and looks at the current market environment, the logical relationship between each link can deduce the result.
2. Facing contradictions: looking for the main contradiction and fragility of the market
Contradiction is the driving force for the development of things. Contradictions can be divided into principal contradictions and secondary contradictions, and the principal contradiction is the place where the conflict is most intense in the market. In terms of data, it shows the characteristics of extremely high or extremely low. Where extreme data occur, it is where the market is most vulnerable and most prone to change. What happens to fragile markets? Or take the lead physical inventory data as an example, superimposed with the lead price trend chart, we can see that every time lead inventory is hit to an all-time low, the high probability corresponds to the high level of lead price.
But at the same time, it should be noted that the extreme of single-dimensional data does not necessarily deduce the movement of the price in a certain direction. For example, the inventory in April 2020, after hitting an all-time low, did not pull down the price of lead in the process of accumulating stocks.
Therefore, there are contradictions in the market all the time. Sometimes the contradictions in the industry point to falling prices, but the contradictions in the macro market point to rising prices. At this time, it is necessary to judge which contradiction is the main contradiction in the market.
3. The observation is greater than the prediction.
The main indicators for observing the lead market mainly include six aspects:
1. Lead inventory, lead warehouse receipt and lead warehouse receipt volatility
2. The ratio of lead futures trading volume to lead futures position (speculative index)
3. The price difference between lead and recycled refined lead (indicator of the supply of recycled refined lead)
4. The ratio of the price of waste battery to the price of recycled refined lead (index of shortage degree of waste battery)
5. The ratio of the current structure of the inner and outer disk to the ratio of the inner and outer disk (related to import and export)
6. The ratio of battery price to lead price (an approximate indicator of the profit of battery enterprises)
First of all, the general methods of lead price analysis and prediction are mainly induction and deduction, each of which has its own defects, one will make you look higher when you rise and lower when you fall; the other will make you unable to deduce a deterministic price direction from contradictory market information.
Secondly, through the analysis of market data, we can find the place where the market conflict is the most violent, that is, the market is the most fragile and easy to change, and the adaptive characteristics of the market will promote the return of extreme data to equilibrium. Once the direction of market environment change is determined, the direction of price change will be determined.
Finally, I think that the observation of the market environment takes precedence over the prediction of the price direction, improving our vision of the market, and wearing magnifying glasses and binoculars can help us to judge the price trend.
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