Rebirth of the Capital Legend

"The market panic is really getting out of hand!" As countless investors scrambled to escape, frantically selling off their holdings, Li Jinshi, a member of the 'Fushan Group's' major speculative trading group, stared at the market trends with extreme shock. He exclaimed, "It's only 10:40 AM! And already 103 stocks have hit their daily limit down! This is outrageous! There haven't been any major negative news events in the market. How could it suddenly plummet like this?"

“I really don’t understand. Today’s market trend is obviously a bit abnormal.” As Li Jinshi sighed, Chen Guiyun chimed in, “The key is that the US stock market was still on a broad upward trend last night. This market performance is too unexpected.”

"The main reason is the profit-taking in the market, which triggered panic." Liao Guoxiang also chimed in at this time. "There are also factors such as the expected decline and the lower-than-expected inflow of new funds. But no matter what, the fact that the market could fall to this level today is indeed problematic."

"The key is that the main areas targeted by the sell-off are still the ChiNext board, which is dominated by small and mid-cap stocks, as well as the Huazheng 500 Index and the CSI 1000 Index," Li Jinshi said. "I feel that the entire small and mid-cap sector has not risen much to begin with, so it is really unexpected that it could be sold off like this."

“Indeed.” Chen Guiyun nodded and said, “If we’re talking about the panic effect triggered by profit-taking, then in reality, the ‘emerging industrial chain’ sector itself hasn’t risen much, and there’s hardly any accumulation of profit-taking shares. This doesn’t make sense. I feel that today’s sharp drop is very unusual.”

"Sigh, whatever the reason that triggered this sharp drop, it has already happened," Li Jinshi said. "Now we should be thinking about how to deal with it."

"Do we even need to think about this?" Chen Guiyun said. "The entire market has collapsed, and liquidity is rapidly drying up. Looking around, apart from the liquor, white goods, and financial sectors where funds are concentrated to seek refuge, all other sectors and their related stocks are falling across the board. Moreover, the market is full of active selling, and there is no active buying power at all."

In this situation, the only option is to quickly cut losses and exit the market.

Even if many stocks seem cheap and you want to buy at the bottom, you have to wait until this wave of panic subsides before you can slowly enter the market.

Otherwise, you'll have to go in and catch the flying knife with your bare body.

"Quickly reducing positions, clearing out positions to stop losses, and preserving principal is definitely the right thing to do," Liao Guoxiang said. "But I always feel that at this position, the overall market's chip structure is still relatively stable. Moreover, the stocks in the 'emerging industrial chain' sector haven't risen much, so the downward momentum is limited. Furthermore, the 'major infrastructure' theme, as well as the main sectors on the main board such as liquor, white goods, pharmaceuticals, consumer goods, power, and finance, showed strong initiative during today's trading session before panic spread."

This shows that there is indeed a considerable amount of capital willing to go long at this price level.

The market is currently experiencing a panic effect.

I think the surge was artificially amplified by a large number of stop-loss orders and profit-taking sell-offs.

If you take the time to observe, you can sense that the market's emotional pendulum has swung to another extreme.

The market's own chip structure is relatively stable, and this position has a strong support effect. In addition, there are no major negative news stimulating the market.

I think it's when the pendulum of emotions swings to another extreme.

While it may not be the most extreme buying point, it can be considered a general buying point.

Generally speaking, a suitable buying point is often a range rather than a precise price level. Similarly, a suitable selling point is often also a range rather than a price level under extreme emotional circumstances.

Entering the arena now does indeed feel a bit like catching a flying knife with your bare hands.

However, I think it's still necessary to catch this throwing knife.

At this moment, the market seems to be falling sharply, but we should also pay attention to the fact that the market has finally seen an increase in trading volume.

Amidst a massive panic sell-off, the number of passive buyers is rapidly increasing, meaning that if the index can hold at the 3000-point level...

The 'emerging industrial chain' sector, which has already experienced extreme sell-offs, has many oversold stocks.

It still has strong rebound potential.

I think at this point, there's no need to continue being bearish and selling off shares in an extreme sell-off.

“But…” Li Jinshi said after hearing Liao Guoxiang’s analysis of the market trend, “There is absolutely no sign that the market is about to stop falling!”

Chen Guiyun also said, "I haven't seen any signs of the market stopping its decline. Moreover, with hundreds of stocks hitting their daily limit down, it seems that the overall market sentiment is collapsing further, with more and more stocks losing liquidity and heading towards their daily limit down."

In this situation, Brother Liao, isn't your analysis a bit too optimistic?
I feel that, given this situation, the market trend for the entire day will be quite ugly.

Even if one were to enter the market to catch a falling knife, it should be after today's panic has been fully vented and the market opens significantly lower tomorrow due to inertia.

Moreover, if the index continues its sharp decline at the close today...

It's highly likely that the Shanghai Composite Index will completely retrace to the 3000-point level tomorrow.

Then we'll see how strong the support is at the 3000-point mark on the Shanghai Composite Index. If it is indeed strong, and the buying power rebounds, then we'll see.

At that point, it would indeed be worthwhile to consider buying back a large number of shares and taking advantage of the bottom.

"Right now, it feels a bit early."

“Agreed.” Li Jinshi nodded and said, “Given this situation, I don’t believe the intraday trend can reverse. Moreover, the ‘major infrastructure’ theme, which originally supported market sentiment and had some guiding effect on the market trend, has now completely collapsed. Looking at the trend of several popular stocks in the ‘major infrastructure’ theme, it feels like there is no hope for the intraday trend to reverse.”

Moreover, the stock 'Oriental Yuhong' has seen a sharp pullback, and there are also obvious signs of increased trading volume.

If this stock falls to its daily limit down in the afternoon.

Meanwhile, the post-market trading data shows that the funds in the 'Fuxing Road' stock are also taking profits and exiting the market. If this is the case, then the post-market sentiment will undoubtedly be more panicked and worse.

Therefore, entering the fray at this moment to catch the flying knife is actually not cost-effective at all.

I think it's more important to reduce positions and cut losses at this point. From a macro liquidity perspective, the market trend at this stage doesn't seem to have the momentum for a V-shaped reversal.

Moreover, although the 'emerging industrial chain' line has not seen much growth.

However, the main theme of "major infrastructure" and the main sectors that major institutions previously favored, such as liquor, white goods, pharmaceuticals, consumer goods, power, and finance, have indeed risen to relatively high levels in the past few months.

In this position...

Its potential for further decline cannot be described as weak. In short, for the sake of caution, it would be more appropriate to wait until this wave of panic subsides before re-entering the market to go long.

With the main speculative capital group of the 'Fushan Group'.

The analysis and discussion of the current market situation by three core institutional investors.

In the market, as trading time progresses, the overall situation continues to deteriorate.

At 10:51 AM, "QuanTong Education" hit the daily limit down, bringing the total number of stocks hitting the daily limit down in the two markets to 121. Among them, the "online education" sector, which was previously a hot topic in the "emerging industry chain" sector, has seen a terrifying drop of 5.65%. Seven related concept stocks in the sector have already hit the daily limit down.

At 10:55 AM, in the "major infrastructure" sector, Huaxin Cement, which had previously hit its daily limit up but then plummeted, had fallen back to 0.89%, essentially a 10% drop from its daily limit up, equivalent to a daily limit down. Simultaneously, other "major infrastructure" concept stocks closely correlated with Huaxin Cement, such as Shougang Group, had fallen from a high of nearly 7% to a significant decline, and Tianshan Cement had also fallen from an 8% gain to a 3% loss.

At 10:59 AM, the ChiNext index fell by 3.56%, essentially returning to its previous starting point and completely erasing the recent continuous rebound. Its bullish trend is now facing an extreme test. If it continues to fall and breaks through the support level, it means that the support platform has failed, and the ChiNext index will likely continue to explore new lows.

At 11:06, the decline in the three major sectors of the "emerging industrial chain"—film and television media, internet software, and internet applications—began to widen to over 5.5%. Among the more than 500 constituent stocks in these three sectors, nearly 70 stocks hit their daily limit down, accounting for half of all stocks hitting their daily limit down in the entire market.

At 11:08, LeTV's stock price hit a 7% drop, and the trading volume surged dramatically.

At 11:09, the stock price of 'Netspeed Technology' also fell by more than 7%.

At 11:10 AM, 'Tianshan Cement' plummeted to a 5% drop, a daily decline of over 13%. At almost the same time, 'Huaxin Cement' had fallen from its daily limit up to near its flat price. Also at the same time, the entire 'major infrastructure' sector, including real estate, construction and decoration, building materials, non-ferrous metals, steel, and coal, saw its indices fall by more than 2.5%.

At 11:12, the stock price of 'Oriental Yuhong' fell by 7%.

At 11:13, the Shanghai Composite Index fell by 1.78%, getting closer and closer to the 3000-point mark.

At 11:15, while the entire market continued to decline, the banking, liquor, and white goods sectors continued to rise. Among them, a number of heavyweight bank stocks, as well as several leading stocks in the liquor and white goods industries, all rose by more than 1% against the trend, and the trading volume was increasing. It seems that the panicked funds in the entire market are rapidly flowing into these stocks for safe haven.

At 11:17, the A50 index fell by 1%, but it was still the strongest performing index among the two markets.

At 11:18, the Shenzhen Component Index fell by 3%, and the average decline of individual stocks in the two markets reached 4%.

11点20分，华证500指数、全证1000指数的盘面跌幅，都扩大到了4%以上。

At 11:21, the stock price of 'Huaxin Cement' continued to decline, reaching a drop of 1.2%, with an intraday fluctuation of nearly 13%.

At 11:23, the number of stocks hitting their daily limit down in both Shanghai and Shenzhen stock exchanges reached 136.

At 11:24, the "smartphone industry chain" and "new energy industry chain" sub-sectors of the "emerging industry chain" main sector also began to collapse across the board, with a sharp and accelerated decline.

At 11:25, the automotive industry sector index fell by 3%.

At 11:26, LeTV's stock price fell by 8%, and the trading volume surged to 17 billion yuan, showing a strong tendency to hit the daily limit down.

At 11:27, the stock price of 'Maruda Films' fell by 7%.

At 11:28, the Shanghai Composite Index fell by nearly 2%.

At 11:29, the number of stocks hitting the daily limit down in the two markets reached 146, and the rate at which new stocks fell began to accelerate further.

Finally, at 11:30 a.m., the two markets came to a midday close. The number of stocks hitting the daily limit down was 148. The Shanghai Composite Index closed at 2.02%, the ChiNext Index fell by 4.11%, and the Shenzhen Component Index fell by 3.37%.

The performance of various industry sectors and concept stocks in both Shanghai and Shenzhen markets was as follows.

Apart from banks, liquor, and white goods sectors, all other sectors experienced sharp declines.

Moreover, out of more than 2700 stocks in the market, less than 300 stocks are still maintaining a slight positive trend, while the other stocks are generally down by about 4%.

Faced with such a dismal midday closing performance.

The entire market, both inside and outside, was bewildered not only by major institutional investors but also by the vast majority of retail investors, who were not only panicked but also unable to understand the situation.

After all, there were no negative news items in the market.

Moreover, the external market trend is one of continuous upward movement.

Logically speaking, there is absolutely no reason for the A-share market to fall today.

However, market trends often do not develop according to the normal logic that everyone expects. Unexpected sharp declines are the most devastating.

Just when everyone thought that the market would not see a turning point again.

I thought the market trend this afternoon would likely be even more panicked, and there would likely be another instance of thousands of stocks hitting their daily limit down.

Equally unexpected.

Significant positive news has begun to emerge in the market.

Key national departments jointly released detailed rules for subsidies for 'new energy vehicles' next year. According to the rules, subsidies will remain largely unchanged, and the rules also state that the government will continue to increase policy support for new energy vehicles in the future.

In addition to this benefit.

A spokesperson for the central bank also stated directly that further interest rate and reserve requirement ratio cuts will be implemented as needed to further release liquidity into the market. (End of Chapter)