Today's data reveals a profound market phenomenon: prices are generally rebounding, but sentiment remains at a freezing point. Gold, U.S. stocks, and the cryptocurrency market have all recorded gains, while the cryptocurrency greed index remains at "extreme fear" with a score of 14. This is not simply a question of whether the market has bottomed out; rather, it is a clear demarcation of the cognitive levels of traders: are you a trend follower or an advantage builder?
Ordinary traders see prices rising and immediately think, "Opportunity has arrived." In contrast, traders with "Xuanwu thinking" see a more complex picture—the time difference and expectation difference between "price correction" and "emotional correction". It is this divergence that provides the best window for establishing new advantages.
1. Essence of divergence: Why does 'price rise' not equal 'opportunity arrives'?
When prices rebound but emotional indicators (like the Greed Index) remain extremely pessimistic, the core signal conveyed by the market is:
This is a 'lack of confidence' rebound: the rise is mainly driven by short covering, technical rebounds, or local fund inflows (like institutions buying on dips), rather than widespread market consensus and new buying power. This typically means the foundation of the rebound is not solid.
The market's 'memory' is still in a period of pain: investors who have just experienced a decline have had their risk preferences and trust systems destroyed, requiring a longer time and stronger signals to repair. A brief price rebound is insufficient to heal such trauma. At this moment, the market resembles a scared patient rather than a vigorous warrior.
'Xuanwu perspective' interpretation: This divergence period is precisely the stage where 'Turtle' and 'Snake Shadow' strategies have clear divisions of labor. The Turtle strategy can begin to assess the price structure calmly based on strict mathematical positions after a rebound, looking for high-probability mean-reversion entry points, rather than chasing highs. The Snake Shadow strategy must remain highly vigilant, as true trend reversals require waiting for signals of 'both emotion and price confirmation', rather than the current single price rebound.
Second: Layering of traders: Are you utilizing divergence, or being utilized by it?
The market divides traders into three categories through divergence; your actions determine your level:
First layer: Emotionally-driven traders trapped by price.
Performance: Upon seeing BTC rebound by 2%, they immediately feel the 'fear of missing out', hurriedly entering the market driven by emotion.
Outcome: It is easiest to buy at the rebound 'tail' or the second-highest point. Once the market verifies the bottom with another retracement (which is highly probable before emotional repair), they will bear new losses and emotional strikes.
Essence: They are victims of divergence, buying into the panic that has not yet dissipated at higher prices.
Second layer: Cautious traders waiting on the sidelines.
Performance: They see the rebound but remember the pain, choosing to hold still. This is a huge improvement over the first layer, preserving capital.
Limitations: Their state is 'passive waiting', lacking a methodology to actively utilize the current market state. If a real trend initiation signal subsequently occurs, they may miss out again due to hesitation.
Essence: They are divergent bystanders, safe but unable to turn market stages into their own advantages.
Third layer: 'Xuanwu traders' who build advantages using divergence.
Performance: Treat the current 'price-emotion divergence period' as a crucial 'advantage establishment period.' They do not long or short trends but rather long 'probabilities' and 'rules.'
Core action:
Calibrate the system: Check and confirm whether the triggering conditions for 'Turtle' and 'Snake Shadow' strategies in the current environment are clear and accurate.
Optimize parameters: Based on the current volatility (such as a significant drop in the VIX index), recalculate positions and ensure precise risk exposure.
Preset paths: Develop clear, emotionless response rules for the two main possibilities the market may face next—failed rebounds leading to retests or genuine reversals after solidifying.
Essence: They are users of divergence, silently building the strongest fortifications for the next stage while others in the market are still swayed by emotions.
3. Core operational manual for divergence periods: Transform 'uncertainty' into 'rule advantages'.
Now is not the time to trade 'direction', but to trade 'rules'. Please execute the following:
Step 1: Conduct 'state confirmation' rather than 'direction prediction'.
Take out a blank sheet of paper and write down:
Current market status: Price rebound, emotional panic (Greed Index 14).
My 'Turtle Strategy' directive under this condition is: ______ (for example: only execute the Nth batch layout when the price retraces to the XX key support level, otherwise remain silent).
My 'Snake Shadow Strategy' directive under this condition is: ______ (for example: maintain a state of red alert silence, unless a 'price breaks through the XX structure and the fear index continuously rises above XX' dual confirmation signal appears).
Step 2: Execute 'position pressure test'.
Assume the worst-case scenario occurs (rebound fails, price breaks below previous lows), ask yourself:
How much of my current position (or planned position) will cause me to lose a percentage of my total funds?
Is this number within my 'maximum acceptable loss per trade' range (for example ≤2%)?
If it exceeds the limit, what is my adjustment plan? (It must be to immediately reduce the planned position, rather than 'believing it won't drop that much').
Step 3: Define and wait for 'real signals'.
True opportunities do not lie in the first rebound, but after the market proves itself. Clarify the 'ticket' for the opportunities you focus on:
For the crypto market: 'I will only consider the possibility of trend strategies when the Greed Index consistently rises to the 'neutral' zone (for example >45) and the price consolidates above a key position (like $70,000) for more than a week.'
For precious metals/U.S. stocks: 'I will only consider emotional repair to be real when the assets I focus on show significant volume expansion and continued contraction of volatility (VIX) during their rise.'
Conclusion: Divergence periods are gifts, not challenges.
The market will not send you money every day, but it will periodically provide you with something more valuable than money—a perfect window period to establish cognitive advantages and rule advantages.
When price and emotion diverge, market noise is greatest, and temptations are highest; this is also the decisive moment to widen the gap in mindset and discipline between you and the retail crowd. Your task is not to guess 'if this rebound is real', but to execute 'how my system should operate in this classic scenario.'
Remember: While others calculate profits, you should calculate risks; when others chase prices, you should wait for signals; when others are torn apart by emotions, your system should output absolute calm.