Over the entire weekend, everyone was discussing the trend of A-shares today. Due to the significant drop last Friday, people's emotions were quite agitated, which is a normal phenomenon. In today's morning article, let's talk about what is most unnecessary for the current A-shares and whether there is a policy bottom. This will help everyone to objectively view the situation of A-shares in future analysis and judgment.
Firstly, does the current A-shares have a policy bottom? Regarding this question, the trends on July 21st and 24th were not policy bottoms, and the market currently does not meet the conditions for a policy bottom. I have proposed two essential conditions for a policy bottom:
1. There must be a sufficiently large decline. Currently, the A-share market has only fallen by 6.7% from 3418 points to last Friday. In 2008, the policy bottom was established after the market fell continuously for two months, with a drop of 38%. The management introduced stamp duty adjustments and substantial benefits such as Central Huijin's shareholding increase, triggering a significant rebound in the market. After that, the market fell again and found the market bottom.
Advertisement
In 2018, the policy bottom was from 3333.88 points on March 13th, falling to 2449.2 points on October 19th, with a drop of 884.68 points, a decline of 27%.
The decline lasted long enough. In 2008, it was almost a one-sided drop for two months, and in 2018, it lasted for seven months. This time, the decline has also been two months, but the amplitude is still within the range of fluctuation. The market has neither broken through nor experienced a continuous significant drop, and the decline is much smaller.
2. The second condition, which is also an important prerequisite for a policy bottom, is to have specific policy measures to boost the stock market and substantial capital inflow, such as the stamp duty adjustment in July 2008, the interest rate cut and reserve requirement ratio reduction in June 2015, and the historical shareholding increases by Central Huijin. Only these criteria can be called a policy bottom.
Currently, there is no information in this regard, only rumors flying everywhere. The most common are improvements in the technical aspects of the exchange, and Central Huijin has not released any information about shareholding increases.On the contrary, from the transaction data we can see: currently, the A-share securities financing holding concept has seen the main capital almost net outflow every day, with a significant net outflow of 12.1 billion yuan last Friday, the state-owned enterprise reform concept has seen a net outflow of 14.6 billion yuan, and the central enterprise reform concept has seen a net outflow of 10.1 billion yuan.
Thirdly, through the above two conditions, we can see that there is currently no policy bottom in the A-share market, because the market has not broken through, there is no process of bottoming out, and there is no real money entering the market, how can there be a policy bottom?
What is the current trend of the market? I have already made it very clear in my article yesterday: the rebound from July 25 to last Friday is a bullish trap that lures people in.
The rebound of the securities sector is a catch-up market compared to other major financial and heavyweight stock sectors, and it also serves to cover the main capital outflow of other large market value sectors.
Secondly, since this bullish trap has been completed, what is the market most afraid of now?
1. To be honest, the market is most afraid of some so-called good news that is not painful or itchy.
Because at the beginning of the decline, everyone is scrambling to escape, and what is needed is some vague news that lacks substantive content to stabilize some people who are eager to get out. These short-term high-chasing funds are temporarily stabilized by the news, and the main capital can exit calmly.
The main capital can only make people believe that the current market is at the policy bottom, and make you feel: even if you are trapped, don't be afraid, the market bottom will come soon, the market bottom comes, the big market comes, the bull market comes, and you are untrapped, untrapped, you make money, this is the key to the current hot policy bottom.In the current state, the more good news there is, the more the market falls, unless it's a substantial good news like reducing stamp duty, lowering reserve requirements, and cutting interest rates, or the Central Huijin Investment Ltd. taking action to increase holdings, which can reverse the downtrend.
Because people's expectations are almost unanimous, which is to continue to fall, so when good news comes out, there are so many institutions in the market, each with their own ulterior motives and unsold goods, and everyone wants to make the other party a scapegoat. To some extent, these trivial good news have become the fuse for their selling.
2. The main force's capital duel, the ones who suffer are the numerous retail investors.
Especially some new retail investors, following the main force's big pie to chase high, and as a result, they are trapped. They continue to find reasons to be patient and hold the stock according to the prospects described by the main force after being trapped. At this time, people often hear some words such as the national will.
In April 2004, when the market fell to 1,500 points, I had a drink with a few new retail investor friends, and they shouted that 1,500 points was the iron bottom, and the country would not let it fall below. As a result, they argued fiercely, but the market fell to 998 points in May 2005, and A-shares started a magnificent bull market.
What does this show? It shows that the bull market is made by falling, and the stock market has its own operating rules. Shouting is not useful, and we should respect A-shares and the market. No matter what you do, you should learn to respect them. If you want to make money, you should respect money and respect their operating rules. Only when the capital flows into the stock market will the stock market rise. Those who understand the situation are outstanding, to put it simply, be a clever person in the stock market, I give this sentence to everyone.
Comments