A-Share: Rising Volume, Stagnant Prices; Is Market Risk Increasing? Awaiting Clear Signal

Good news is that both markets continued to see increased trading volume today. Within less than an hour after the market opened, the turnover of Shanghai and Shenzhen stock markets exceeded one trillion, indicating that everyone's enthusiasm for trading is very high.

The bad news is that after the market index opened high and surged, it fluctuated and fell back, showing some hesitation during the day, giving people a feeling of increased volume but sluggish price growth.

Comparing with yesterday's market performance, the biggest change is the sentiment. Does this mean that the risk of the market index is increasing? Let's talk about my own views:

1. The volume has increased, but there is pressure on the rise, how should we see it?

Looking at the trend of the market index in the morning, the fluctuation up and down during the day is quite entangled. The high opening represents everyone's optimism about today's market, the fall represents the pressure after breaking through the previous high of 3331 points, and the bottoming out and then rising represents the support below.

It seems to be quite entangled, but in fact, it is the mutual game of various funds. At this time, there is no need to be pessimistic about the index. From several aspects:

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(1) First, from the perspective of capital, there is a certain divergence today. The market as a whole has increased volume, but the outflow of domestic capital in the morning is also quite large. In the past, the outflow of domestic capital was about three to four billion yuan a day, but today it was more than six billion yuan in the morning. The overall volume may not be large, but the speed is relatively fast.

It can be seen here that many funds have started to cash in profits in the short term today, and the increased volume of the market indicates that the market is still good, with people cashing in profits and leaving, and immediately there are funds that take advantage of the low prices to take over.

Therefore, I think such capital activity does not support a large adjustment in the stock market, and there is no need to worry about the index at all;

(2) Secondly, regarding whether it is a situation of increased volume but sluggish price growth, I think there is a big debate. The premise is that the index is indeed a slow bull market now. Looking at the index from the perspective of a slow bull market, we cannot have too high expectations. For example, although the trend today is entangled, the highest point of 3340 points is also a new breakthrough. Although there are repeated fluctuations, it is mainly around 3300 points and the 5-day moving average, which is a good intraday adjustment.I believe that today's divergence is still primarily intraday market washing, the slower the index moves here, the more it feels like a volume expansion with price stagnation, and the more cautious the funds inside and outside the market become. In reality, the main force funds are trading time for space, with the goal of smoothly getting through this period, and when the "shoes drop" in November, there will be significant actions.

Since it is now clear that we are in a slow bull market, and everyone agrees that there will be a market sprint driven by the expected increase in funds in November, then everything now is just a fluctuation and washing, not an end, so there is no need to worry.

(3) Finally, looking at the potential incremental funds, the major broad-based indices have raised a considerable amount of incremental funds, all of which are waiting for the right timing to enter the market. The previous 80 billion yuan of institutional funds that increased their holdings in the stock market are also looking for opportunities.

Therefore, if the broad market index really adjusts down, there will inevitably be a lot of funds rushing to enter. The environment of the A-share market has already changed, with the support and endorsement of the central bank and other policies, there should be enough confidence in the future market.

In general, I think the current fluctuations are a normal phase of the slow bull market, with periodic highs and periodic fluctuations, but ultimately, it is continuously moving upwards. Many people now lack confidence and have unstable expectations, and they may become anxious about investing as soon as they see the index fall or rise slowly. This mentality needs to be adjusted in a timely manner.

If one gets excited when the market rises and pessimistic when it falls, it indicates that they are not yet adapted to the current market. It is necessary to have a firm belief and goal, and only by not wavering arbitrarily can one hold onto low-cost chips at the bottom.

2. Can it still close up today? Wait for a clear signal to appear, which is the breakthrough of the index market:

Looking only at the index, it is true that there has not been a significant increase in these two weeks. However, everyone should look at the market's individual stock profit effect. During this period, low-priced stocks have gone crazy, and Shuangcheng Pharmaceutical's stock price has multiplied tenfold in three months. There has also been a noticeable increase in stocks that have doubled in price in the past month. The number of stocks that hit the daily limit rose to nearly 300 yesterday, indicating that the market's profit effect is very hot.

The key is that the speculation of many consecutive board stocks has made many people who like to hit the board feel unbelievable. Many people have started to complain that the market only follows the hype, with performance stocks not rising, high dividend sectors not rising, and industry leaders not rising, only poor performance and garbage stocks continue to rise. But aren't these characteristics of a bull market sentiment?

This indicates that the market's risk preference is relatively high, and everyone is not focusing on some fundamental aspects but only on emotional changes. However, these emotions can be made in the short term, and one must not linger in the battle.I have already warned everyone shortly after the market opened to avoid forcing high-chasing, as I am concerned about some new investors who, seeing so many small-cap stocks hitting their upper limits, can't resist the urge to follow the uptrend, especially those who were initially hesitant but later couldn't help but chase the highs. If they get trapped, it greatly affects their investment mentality.

Therefore, I reiterate my views on short-term trading:

Short-term trading must avoid lingering in the market, especially now when emotional fluctuations are beginning to increase, it is important to prevent high-priced stocks from entering their final frenzy.

For the funds in the market, they are also waiting for a clear signal:

A weakening signal of emotional divergence in high-priced stocks;

When the range of high-priced stock liquidations expands, it means that a switch from high to low valuations begins to take shape, and at that time, market funds may start to embrace performance and market capitalization as the main focus, which is also a support for the broad market index.

As for today's stock market, will it continue to plummet in the afternoon?

Today, it is evident that many short-term funds are cashing in on profits, which puts a certain amount of pressure on the market. However, a sustained one-sided drop throughout the day is unlikely. The morning saw big finance stepping in to support the market, and it is probable that the afternoon will still be dominated by big finance to stabilize the index.

Therefore, it is expected that the broad market index will continue to close above 3300 points for the day.

In terms of individual stocks, it is still preferable to hold onto your positions. If your holdings have seen significant gains recently, you might consider adjusting your portfolio. If your stocks are in a weak consolidation phase, the next wave could be an opportunity for a shift from weak to strong.In this wave of the market, most individual stocks will break through the post-holiday highs, which means that new investors who joined the market after the holiday, as long as you do not blindly chase rises and sell on dips, will generally be given the opportunity to break even or even make a profit. This is because stock market education is not just about telling everyone not to buy high, but also about teaching the importance of patience in investing.

For bearish and missed opportunity funds, seeing the market under pressure today might bring some joy, but when a real adjustment comes, some funds will still be hesitant to enter the market. This is the desired effect of the main force funds.