Rebirth of the Capital Legend

“Our A-share market is a one-way market. When it comes to finding positive and negative news, everyone is more willing to believe the positive news and deliberately ignore the negative news.” Upon hearing Zheng Jinming’s lament, Lao Qian in the group responded immediately. “That’s not hard to understand. After all, you can only make money by going long. But whether this phenomenon reflects the true sentiment of the market is still questionable. Today’s news was indeed mostly positive, but the market’s performance during the day, especially in the afternoon, was not very good.”

I think that optimism at this time needs to be approached with caution.

The Shanghai Composite Index has been unable to break through 3100 points for a long time, while the Shenzhen Component Index and the ChiNext Index have been fluctuating downwards, which gives me a very bad feeling.

There's a saying that goes something like this... "A prolonged period of sideways movement is bound to lead to a fall!"

With the index at this level, trading volume remains weak, and the market is gradually losing its profit-making potential.

It's unlikely that major funds will aggressively push the market up further. Taking advantage of the momentum to gradually take profits, or adjusting positions to defensive sectors, is the long-term strategy in trading.

However, if the major funds in the market all think this way...

This naturally leads to a lack of funds for further investment, resulting in increasing upward pressure and stronger downward momentum.

Furthermore, among the positive news items today, there are no particularly significant positive developments.

Basically, the news was as expected.

Generally speaking, this type of news is unlikely to provide a strong stimulus to the market; at most, it will only affect the market for a minute or two at the opening.

Overall, I still prefer a cautious approach. Over the next few days, I plan to gradually reduce my positions, keep cash on hand, and observe the situation for a while before making any further decisions.

"I think caution and optimism should be viewed relatively," He Chong replied after hearing Lao Qian's words. "For the weak sectors that lean towards the technology theme, such as film and television media, internet software, and internet applications, and their related concept stocks, given the increasingly obvious losses, a cautious attitude should indeed be maintained. However, for the two core themes of infrastructure and consumer goods, where the internal shareholding structure remains stable and the bulls have not encountered any problems, and the consumer electronics sector, which is showing relative strength today and clearly diverging from the weak technology sector, a relatively optimistic attitude can still be maintained, and we can continue to be bullish and buy."

I think the overall market trend will most likely continue to show the current divergent trend.

After all, the current market volume is gradually shrinking.

At the same time, there were no major negative news affecting the market, whether inside or outside, domestically or internationally.

Furthermore, on the macro level, although the real estate sector continues to drain liquidity, the central bank's liquidity injections are also substantial.

These newly injected liquidity.

Although ultimately the vast majority of funds will be siphoned off by the real estate market.

However, some of it still manages to flow into the stock market.

In other words, although the current market volume and liquidity are limited, looking to the future, the market liquidity and potential buying power are likely to continue to increase.

Since the potential buying interest may continue to increase.

Therefore, in the absence of major negative news, the downward momentum of the market at this stage is very limited.

Since there is insufficient downward momentum, the risk of a market crash can be largely ignored.

As long as the market does not experience a one-sided sharp decline.

Given the current market trend, various capital groups in the market will inevitably continue to flock to the two core themes with the best profit potential: large-scale consumption and large-scale infrastructure.

As for sectors that lean towards the technology theme, such as film and television media, internet software, and internet applications...

Even though it has already fallen a lot.

Although these sectors are currently at a rather low level.

However, it is not advisable to buy at the bottom without a significant improvement in the industry's fundamentals.

After all, market trends have a strong inertia, and investors' psychological expectations and thought processes also have a strong inertia.

Given the current extremely strong loss-making effect in these sectors.

At the same time, it is also driven by the good profit-making effect of the main themes of large-scale consumption and large-scale infrastructure.

Most investors in the market, driven by emotions, will continue to sell off their holdings in technology-related stocks, thereby further converging on the consumer and infrastructure sectors to embrace the trend.

So, in summary...

Given the continued market trend, there is no need to be overly pessimistic or worried about the future market performance.

Furthermore, regarding the two core themes of large-scale consumption and large-scale infrastructure construction.

There's no need to be afraid of heights or dangers.

Following the current market trends is likely to be a good strategy.

Today, I not only didn't sell my shares in the major infrastructure sector, but I also added to my position significantly. I am firmly bullish on this sector and believe it can continue to rise.

Furthermore, if the major infrastructure sector reaches this point, there will be a significant adjustment.

Therefore, as the core point of sentiment along this line, the stock of Oriental Yuhong would not be trending like it is today.

In fact, regarding the major infrastructure sector, I think Oriental Yuhong stock can be regarded as a leading indicator of this sector.

If this stock starts to trade sideways with consistently high volume, then caution is advised.

This stock is still in a phase of rising on low volume, maintaining a low trading volume and continuing to expand its upward space by taking two steps forward and one step back.

Then we should continue to boldly pursue large-scale infrastructure projects.

Of course, I feel that the consumer sector is indeed not showing much upward momentum.

This sector experienced a rapid surge at the beginning of the year, overdrawing too much expectation. Although the entire consumer sector, including liquor, white goods, retail, and food and beverage industries, did indeed usher in a good opportunity for a turnaround in the industry cycle under the macro background of consumption upgrading, the stock prices had already overdrawn this expectation. This directly made it difficult for the core stocks on this sector to replicate the trend at the beginning of the year without new major positive stimuli.

It can only form a phase of sideways consolidation at high levels and a range-bound trading pattern.

My current view on this line is rather conservative.

As for consumer electronics, specifically the Apple concept sector, historically, when anticipated positive news materializes, it is indeed possible for the positive to turn into a negative.

However, compared to other sectors in the consumer goods industry, such as liquor and white goods, this is a different story.

Currently, the consumer electronics sector, specifically the Apple concept stock line, is relatively low, and its recent overall gains haven't been significant. Even if positive news turns into negative news...

I think the room for downward adjustment is also very limited.

"Old He's analysis makes sense." After listening to He Zhong's analysis, Zhang Xinlei pondered for a moment and said, "The market's divergent trend is unlikely to end in the short term. Putting aside the changes in news, just analyzing the technical aspects of the major market themes, the current industry sector indices related to the two core themes of consumer goods and infrastructure, as well as a number of core heavyweight leading stocks, do not show obvious signs of a top correction."

At the same time, there are indeed no signs of a market collapse or decline in market sentiment.

Although the stock of Shuguang Co., Ltd. almost hit the limit down and then fell back to the limit down today, nearly causing a collapse in market sentiment, it eventually stabilized.

Furthermore, there's the stock of Beijiang Jiaojian, which represents a short-term point of market sentiment.

Today, there was only a brief surge in trading volume when Shuguang Shares experienced a sharp drop, but there was no situation where the stock price plummeted. This is also a sign of a strong upward trend.

As long as the stock of Beijiang Jiaojian doesn't collapse, and can still rely on sentiment to create upward potential.

Therefore, I believe that with this stock as a support for sentiment, the overall speculative sentiment in the major infrastructure sector will not be too bad.

Also, there's the Hong Kong stock market, which is somewhat correlated with the A-share market.

Throughout the major infrastructure sector, especially the real estate development sector, a number of mainland property stocks continued to hit new highs today, with some even reaching all-time highs.

And stocks like Conch Cement.

Despite this situation, the stock prices of our A-shares are still lagging behind those of the Hong Kong stock market.

All of this demonstrates that the main funds in the market are indeed continuing to concentrate on major infrastructure and consumer sectors.

Since the main buying funds are still concentrating on these two core themes.

Indeed, at the current position and at this point in time, there is no reason to be pessimistic. However, sectors that are more technology-oriented, such as film and television media, internet software, and internet applications, have had too much capital siphoned off by the major infrastructure and consumer sectors. These sectors have suffered severe capital outflows and there is not enough external buying capital to replenish them in a timely manner.

This led to a continuous increase in losses in these sectors, which in turn dragged down the entire market.

However, this phenomenon should be alleviated quickly after the brief sell-off.

After all, the stock prices of these stocks, which are more focused on the technology sector, are already low enough. Many of them have fallen by more than 70% compared to the peak of the last bull market. In other words, no matter how bad the overall market situation is, the room for these stocks to continue to fall is very limited.

In short, no matter how you look at it, the market is currently at a temporary bottom.

At this level, continuing to be bearish is quite dangerous and could easily lead to missing out on further gains.

Of course, from a macro perspective, the buying interest from outside the market is indeed not very active, which makes it difficult for the market to escape the situation of zero-sum game in the current phase.

In other words, the trend remains one of divergence, with some areas experiencing profit-making opportunities.

Given the current state of the game among existing funds, it is unlikely to be changed.

We should be on the right track by focusing on the major consumer and infrastructure sectors, where the largest concentration of institutional funds is in the market, and investing our money in the most profitable and popular stocks.

As for the potential risks...

I think we'll see when the major consumer and infrastructure sectors start to experience significant losses.

When leading stocks like Oriental Yuhong, Conch Cement, Kewan Real Estate, and Poly Real Estate begin to show signs of high trading volume but stagnant price increases, it's not too late to consider gradually taking profits and freeing up positions to prepare for market pullbacks. Talking about pullback risks now is indeed a bit premature.

“Old Zhang, what you’re saying is the normal logic of market trends, but right now the market is severely lacking in trading volume. The main themes of consumer goods and infrastructure have a lot of profit-taking, while sectors that lean towards the technology theme, such as film and television media, internet software, and internet applications, have too much trapped capital,” Zheng Jinming said. “With the continued lack of trading volume, the double pressure from both profit-taking and trapped capital makes it very difficult for the market to move upwards.”

Previously, the main themes of large-scale infrastructure and large-scale consumption were able to thrive even when market volume was relatively low.

A strong upward push will support the index and lead the Shanghai Composite Index from around 2800 points to the current level of 3100 points.

That's because the valuations of leading stocks in these two main sectors were already low.

And the expectations for the future are strong enough.

But look at the situation now. After the valuation correction, are the current stock prices of these industry leaders still considered cheap compared to the changing industry expectations, i.e., the growth in earnings? They've basically returned to the normal valuation range, haven't they?

It has returned to the normal valuation range, but it lacks strong expectations.

During this upward trend, a large number of profitable shares have been accumulated.

The reason why these profitable shares are currently stable and there is no large-scale concentrated profit-taking is because the profit-making effect is still there.

However, with the current lack of positive factors in the market and the rise in stock price exceeding the expectations of fundamentals, its profit-making effect will definitely gradually decrease if performance does not catch up.

When the profit-making effect decreases.

There was also insufficient active buying from outside the market to follow up.

Therefore, with these profit-taking investors selling off their shares in a concentrated manner, it will be difficult for these two core themes to hold up.

Moreover, as sectors that continuously inject capital into the main themes of consumption and infrastructure, such as film and television media, internet software, and internet applications, which are more technology-oriented, as you just mentioned, have seen their stock prices fall to relatively low levels after a large amount of capital has fled. At this level, it is difficult to extract much more follow-up buying capital to flow into the main themes of consumption and infrastructure.

Since the main themes of large-scale infrastructure and large-scale consumption continue to rise, more buying is needed to support them.

On the one hand, it is obvious that under the current market conditions, there are not enough potential buyers to support the stock price and push it up further.

So, where does the upward momentum you're talking about come from?

Anyway, based on my analysis...

The most optimistic scenario for the market going forward is that it will continue to fluctuate here, using time to consolidate the market's shareholding structure.

As for the more pessimistic view, the index will most likely continue to adjust downwards.

At the very least, it needs to retrace to the 3000-point level again to further confirm support and consolidate internal positions.

"Haha... differing opinions are a good thing." After listening to the analyses of Zheng Jinming, Zhang Xinlei, and He Zhong, Old Qian laughed heartily and couldn't help but say, "Whether optimistic or pessimistic, disagreement is ultimately a good thing. As the saying goes, market trends always arise from disagreement. Disagreement means the market still has room to maneuver. Whether it's continued fluctuation at this level, using time to create space, or further downward adjustment, retracing to 3000 points, I think I can accept it." (End of Chapter)