A-Share Market: Caution Against Overzealous Chasing Amid Continuous Rally

Stiffness leads to brittleness.

Under the combined impact of policy measures, the market has initiated a continuous short-squeeze trend, swiftly reversing the short-term pessimistic sentiment and rapidly restoring investor confidence.

Yesterday, the market saw a significant volume increase of 420 billion, with a 76% surge in trading volume, approaching the ten trillion mark. It was evident that a flood of capital rushed into the market.

Faced with the sudden surge in the market yesterday, many people were still catching up, and post-market heavyweight news continued unabated. Major institutions have released research reports optimistic about the market, with the view that "the bottom has been established, and it's time to get on board when there's a pullback" becoming the mainstream.

Last night, one could sense the excitement of investors from social media. After a night of emotional fermentation, the market indeed opened significantly higher today, continuing the short-squeeze trend. On the K-line chart, the Shanghai Composite Index has left two gaps. The gap left in the morning session today was particularly large.

In the first half hour of the morning session, the volume exceeded 200 billion, and by around 10:40 AM, it exceeded 300 billion, with the trading volume clearly and steadily increasing. While increased volume is generally a good sign, such a substantial surge in volume is instead a cause for concern, as it is not conducive to the development of the market trend.

The concerns from the morning session did materialize; the short-term worry is not about a market correction, as a correction would actually be beneficial. The greatest concern is that emotions are too high, leading to market euphoria. The sharp increase in volume in the short term means that for the market to continue rising, it would require a continuous increase in volume. However, with such a large volume in the short term, the ability to sustain the momentum is worrisome.

This market often swings to extremes. Over the past year or so, despite continuous positive stimuli, the market has never responded positively, instead experiencing a continuous震荡 decline, with trading volume shrinking dramatically to around 500 billion. But yesterday's sudden, concentrated policy benefits caught the bears off guard, and the market swung from one extreme to another, with the morning session today continuing the short-squeeze rally.

We know that this market is not short of money; what it lacks is confidence. Yesterday, it was mainly the central bank's concentrated statements, with real financial support for the capital market and the real economy, which gave the market tremendous confidence. The market was instantly revitalized.

To be honest, this kind of market stimulation is the first of its kind in the history of A-shares, so it's understandable that the market reaction is intense. The problem is that if the support is too strong and becomes disconnected from the fundamentals, it could lead to overeager cultivation.Rumors are circulating in the market that the central bank is encouraging leveraged stock speculation. The lessons from 2015 are still fresh in our minds, and we absolutely will not take the old path. However, there is a risk that misinterpretations can arise, which is why correct guidance through news and information is necessary.

We have always emphasized stability and long-term vision. If the market's emotions always swing to extremes, then any rally will be fleeting. Such a market has no future, with many funds approaching it with a mentality of making a quick profit and leaving, treating the market as a place to grab money. The market still lacks long-term stable financial consumers and long-term capital.

A sudden sharp rise in the short term can easily disorient many people. If the market is so volatile that it can be ignited by a spark and extinguished by a puff of wind, it naturally has no future.

After such a long period and a significant drop, it took a considerable amount of time for the market to fall from 3000 points to below 2700 points. However, it cannot be expected to reclaim 3000 points in just a day or two. While it is necessary to restore confidence with a large volume and strong upward movement in the short term, if the rise is too rapid and a large number of speculators enter the market, it can easily lead to wild fluctuations.

Everyone hopes for the market to rise, but no one wants a frenzied surge. The premise of policy intervention must be that stability is paramount. If there is a continuous frenzied surge, it is certainly something the China Securities Regulatory Commission (CSRC) would not want to see. It is not easy to make the market rise, but it is very easy to make it fall.

It is not excessive for the market to rise to four thousand points; the issue is to take one step at a time. If the pace is too fast and the funds cannot keep up, it will ultimately be harmful.

So, I am just reminding investors that if the short-term index moves too fast, everyone should stay calm and not chase the rise. Excessive consensus in emotions can easily lead to extreme market conditions.

Of course, the dense absence of policies over the past year has been more about strengthening the construction of the stock market's absence, laying a solid foundation for the current rescue with real money. Only when the absence level construction is in place will it not lead to the accumulation of new contradictions due to the market's rise.

Let's consider that a bull market is a relay race. Which bull market has ever started in a way that everyone understands, believes it's a bull market, and everyone has entered? How can it continue then? A bull market must slowly progress unnoticed and hesitantly by many. So, in a broad sense, you don't have to worry at all; the journey of the bull market started yesterday, and the bull market will not turn back.

Of course, from my perspective, it may be a bit too early to talk about a bull market now. A bull market is a verb; it can only be called a bull market after it has unfolded. Currently, a large number of stocks are still lying on the floor, and a large number of investors have suffered heavy losses. At this time, talking about the start of a bull market is more of a guess without a foundation.