Rebirth of the Capital Legend

"As the saying goes, 'A wise man does not stand under a dangerous wall.' Since the main trend of the market has changed, it is naturally necessary to adjust positions in accordance with the trend of the market." Before Brother Chen could reply, Xu Qiao continued, "The rebound of the 'emerging industrial chain' sector was originally based on the logic of an oversold rebound, and it did not have enough underlying logic to support it."

Also, if it weren't for the fact that 'Chinese Literature Online' has continued to perform better than expected in the past two days...

The sentiment surrounding the 'emerging industrial chain' has long since reached its limit.

Now that 'Huawen Online' has collapsed, along with a host of related stocks such as 'Huawen Media', 'Quantong Education', and 'LeTV', all of which followed suit, burying all the buying power that drove the market up today. In this situation, is there any hope left?

I estimate that the 'emerging industrial chain' line...

When the market opens tomorrow, the performance of the film and television media, internet software, and internet applications sectors will likely be even more disastrous.

After all, many of the funds that took over the market today will likely experience large-scale stop-losses tomorrow, given the extreme losses.

The concentrated selling pressure from profit-taking, coupled with short-term stop-loss orders and historically trapped positions, creates a situation where profits are concentrated in one area.

As the hype wanes and there is no sufficient underlying logic to support it, the situation becomes increasingly complex.

It is highly unlikely that there will be enough funds available to continue supporting the market and going long in this main sector.

Therefore, the trend of this line will most likely only get worse in the future.

When a large number of active short-term funds in the market flee the 'emerging industry chain' main theme, which other main theme will they enter?

Based on Brother Chen's analysis just now...

Although the current 'major infrastructure' theme is not in a relatively low position, it is still the core theme with the most stable stock structure, the strongest underlying logic and future expectations, and the least upward resistance.

Since the 'major infrastructure' sector currently faces the least upward resistance in the market.

So, after a large amount of capital flees the 'emerging industrial chain' theme, if it needs to adjust its portfolio, it will inevitably continue to converge on the 'major infrastructure' theme.

Meanwhile, the recent trend of the core theme of "major infrastructure construction" has been observed.

It's also clear that many major institutional investors who previously entered this sector, supported by strong underlying logic and future expectations, do not agree that the current price level already reflects future expectations or the expectation of a change in the industry's fundamentals. In other words, these major institutional investors who have been continuously locking in their positions in the "major infrastructure" sector will not wait until the stock price fully reflects future expectations, until the valuation repair is fully reflected, and until the overall trend of the "major infrastructure" sector meets their psychological expectations.

These major institutional investors will most likely continue to lock up their positions.

Of course, this certainly includes the 'Huayi Capital' institution headed by the Su brothers.

As long as the major institutional funds concentrated in the "major infrastructure" sector continue to hold their positions, the amount of free-floating shares in the "major infrastructure" sector will be relatively scarce compared to the current active short-term funds in the market. In other words, when a large number of active short-term funds withdraw from the "emerging industrial chain" sector and reallocate their positions to the "major infrastructure" sector, related stocks in the "major infrastructure" sector will inevitably rise rapidly.

However, as long as its main profit-making effect is brought back by the speculation and bandwagon effect of a large number of short-term funds, it will be revived.

Therefore, the "major infrastructure" sector will inevitably form a virtuous cycle of sentiment and a sustained effect of bullish capital inflows.

In summary…

At this location, at this crucial juncture.

The expected future returns from rebalancing and buying back shares of leading stocks in the "major infrastructure" sector are definitely greater than the expected future returns from continuing to hold shares in leading stocks in the "emerging industry chain" sector.

"Xiao Xu is right." After listening to Xu Qiao's analysis, Lao Wu pondered for a moment and hurriedly replied, "The first rule of trading is to abandon illusions, respect the actual trend of the market, and follow the direction of the concentration of bullish funds and the main trend."

A number of core leading companies in the 'emerging industrial chain' sector.

Today's market essentially exhibited a pattern of massive volume and sharp sell-offs from high levels, burying all the bullish funds that had supported the market during the day.

Generally speaking, this kind of trend doesn't come from any major positive news or policy developments.

In a market where the game of existing capital continues, it is very difficult to reverse the trend because there is too much trapped capital. As sentiment declines, there simply aren't enough active bullish funds to continue pushing the market higher. Or rather, many funds that originally intended to continue pushing the market higher are hesitant to enter after seeing the strong losses in the main trend.

In other words, the "emerging industrial chain" line will most likely continue to be adjusted.

However, looking at the major market indices, the Shanghai Composite Index, the Shenzhen Component Index, and the ChiNext Index are still in a bullish trend.

In other words, under the current market conditions, the overall risk to the market is not significant.

Since the overall market trend is not risky, the market's confidence in going long has not completely collapsed.

The funds that take profits and withdraw from the 'emerging industrial chain' sector will not actually leave the market on a large scale. Instead, they will turn around and continue to speculate on core sectors with speculative potential and less upward pressure. From this perspective, the 'major infrastructure' sector seems to be the only sector that these funds can speculate on.

Given this, and having identified the core leading stocks in the 'emerging industrial chain' theme, they are highly likely to underperform the core leading stocks in the 'major infrastructure' theme.

Then why not adjust your portfolio? Why hesitate?

I believe this is the perfect time to switch positions and adjust our main investment themes.

Due to the across-the-board collapse of stocks related to the 'emerging industrial chain' theme, the overall short-term bullish sentiment in the market is currently quite low.

At this moment, many investors in the market are selling off large amounts of their shares.

This is not a spontaneous profit-taking and exit behavior caused by the stock price rising too high or the expectation being realized.

Many were caught up in the panic at the moment, and it was this panic that led to a massive sell-off.

In other words, once this excessive panic subsides, the market will quickly recover, and by then, there probably won't be many good prices to participate in.

"Besides the factors that Xiao Xu and Lao Wu just mentioned..." Chen Ge paused, then continued, "There is another major reason why I am optimistic about the 'major infrastructure' theme, which is the institutional funds that previously rallied around the main board heavyweights, namely the liquor, white goods, pharmaceuticals, consumer goods, power, and financial sectors."

With these leading stocks in the core sectors, which are heavily weighted in the market, already reflecting this year's expectations, and clearly entering a period of stagnation and consolidation, this is in preparation for fund performance rankings in the second half of the year.

Many major institutions need to adjust some of their positions to sectors with clearer expectations and stronger upward momentum.

Currently, the main sectors with clearer expectations and stronger upward momentum are those that are more heavily weighted on the main board.

Isn't it just about the 'major infrastructure' sector?
In other words, although the market is currently in a zero-sum game, the entry of new funds from outside the market is not obvious.

But regarding the 'major infrastructure' sector...

It has consistently attracted bullish funds, and its performance is significantly stronger than other major sectors in the market.

Moreover, in addition to the market's own funding factors, the speculation in the offline real estate market across the country is still rising. Although the rate of price increases has slowed down recently due to the government's introduction of sales and purchase restrictions in several first-tier cities, the overall upward trend continues.

In other words, expectations for its fundamentals continue to rise.

Thus, with short-term speculative sentiment rebounding in the market, how could the corresponding stock prices not rise?

"Hmm, that makes sense." After listening to the three's analysis, Old Zhang nodded and said, "Brother Chen's analysis is indeed more insightful. As expected, the strong will always be strong. It seems that the 'major infrastructure' sector is indeed the most certain and has the best market depth and breadth in the second half of the year."

During a lull in the discussions within the "Shanghai Short-Term Trading Group" of major speculative investors.

At this moment, it's almost 2:50 PM on both the Shanghai and Shenzhen stock exchanges.

As market trading continues...

The active capital flow in the market continues to flow out of the 'emerging industrial chain' sector on a large scale and into the 'major infrastructure' sector.

And within this flow of funds.

The divergence in performance among popular concept stocks along the two main themes continues.

"Oh no, the stock 'Huawen Online' that I bought in the morning is already down nearly 10% today. Sigh... I'll probably have to write off at least another 5% tomorrow. What bad luck! Before I bought it, I watched it hit the daily limit every day. I finally made up my mind to buy it, and now I'm stuck at the top."

Amidst the continued divergence in market trends, investors who had previously been bullish on the 'emerging industrial chain' theme and related leading stocks on major online stock investment platforms are now in an uproar, with many expressing their disappointment.

"'Huawen Online' is actually doing alright. I bought 'Huawen Media' this morning and have already lost nearly 15% in the day. If it hits another limit down tomorrow, I don't even want to think about it. Damn it... I missed out on making money and only got beaten up."

"Sigh, the trend of the 'emerging industrial chain' sector today is really discouraging!"

"This isn't just damaging popularity, it's a total massacre! It's infuriating!"

"It was a perfect bull trap. All the funds that bought into this main theme this morning were wiped out."

"Isn't this a perfect bull trap? This trend is disgusting."

"What's most disgusting is that small-cap and micro-cap stocks across the entire market have completely collapsed, with an average drop of 3.5%, but the broader market hasn't fallen much at all, and the A50 index is even in positive territory. Isn't that infuriating?"

"Absolutely! I'm so angry!"

"The reason why the index didn't fall much is entirely due to the support of the 'major infrastructure' sector. It's really strange. It feels like the market trend is starting to shift back to the previous situation of focusing on the 'major infrastructure' sector, especially the stock 'Huaxin Cement,' which has been performing exceptionally well today."

"Ugh, just thinking about these stocks makes me so angry. This morning I sold 'Huaxin Cement' at a loss and also bought 'Huawen Media' at the limit up price. This back and forth has made me lose so much that I'm about to explode."

"Wow, that's an amazing move!"

"If it were the other way around, selling 'Huawen Media' when it hit the daily limit up in the morning and then buying 'Huaxin Cement' at an extremely low price would have been even more amazing. What a pity..."

"Back and forth, almost 30 points were gone, it was really bad."

"I held onto my 'Huaxin Cement' stock. I felt that the morning's sharp drop was a bit strange, so I didn't sell. Unexpectedly, it hit the daily limit in the afternoon."

"This stock has secured a strong position with 'Chinese Online' today, and I feel it will become the new market leader!"

"So, does this mean that 'Chinese Online' is completely dead?"

"Not necessarily. Let's see if the market will rebound tomorrow. If it does, there's still hope. But if the entire 'emerging industry chain' sector, including core concept stocks like Huawen Online, Huawen Media, and Quantong Education, opens lower and continues to fall, burying investors, then it's all over. You can give up all your illusions."

"This is truly speechless. The 'major infrastructure' sector, which is at such a high level, is actually experiencing a reversal?"

"I think the 'major infrastructure' sector is still at a very low level. When looking at the position of the main sector, don't look at how much it has risen before, but rather whether it is undervalued compared to future expectations. The current situation of the entire 'real estate industry chain' is completely different from two months ago, or even six months ago. Compared to the increase in offline housing prices, the increase in the core leading stocks in the 'major infrastructure' sector online is not exaggerated, is it? In fact, the increase is relatively lagging behind that of offline housing prices."

"That's true, but it has already risen quite a bit in the early stages, so I don't think it has much room for explosive growth."

"Well, who knows? I feel that as long as the major funds in the market want to continue manipulating the market, they will definitely be able to create more room for upward movement."

"I told you long ago that the rally in the 'major infrastructure' sector is not over yet. Just look at the performance of 'Oriental Yuhong,' the core leading stock. Throughout the entire correction, 'Oriental Yuhong' has never fallen below the 20-day moving average, so it will definitely continue to rise."

"As expected, the main storyline that President Su uncovered is the most reliable!"

“When I looked at the trading data of popular stocks in the ‘emerging industrial chain’ sector, I found that there was basically no trace of institutional funds involved. I knew that the market trend had not yet gained the recognition of the core institutional funds in the market, and its sustainability was limited. Sure enough… Luckily, I avoided today’s big drop.”

"There are 10 minutes left before the market closes. Let's see how the market performs in the last ten minutes. Hopefully, the relevant sectors of the 'emerging industrial chain' theme and their corresponding popular stocks can recover some of their losses and the market sentiment can be restored. Otherwise, the market will be really doomed when it opens tomorrow."

Amidst heated discussions among countless retail investors.

As the market entered its final ten minutes before closing, investors both inside and outside the trading floor, whether holding stocks or not, watched the screen with increasing tension. (End of Chapter)