Text/Editor: Ride Hanhan to cook
This week, the A-share market once again made investors feel its "moodiness". After a few weeks of sharp gains, this week's sharp decline has undoubtedly poured cold water on the market. In particular, the GEM has closed in the negative for four consecutive trading days, and it has recorded a decline of more than 17% from Wednesday to Friday. Such a trend made many new funds disappear overnight, and the market sentiment once fell into the freezing point.
Why did the market turn so suddenly?
One might wonder if the bull market has come to an end after such a violent correction? I don't think so. The market plunge is not entirely bad, it is not just a natural correction after the previous excessive rally, but more importantly, it reminds us that we should face up to the reality of the market and not be bothered by short-term volatility.
Judging from the quarterly trend of the Shanghai Composite Index, the index has soared to 3,674 points this week, just one step away from 3,700 points. At first glance, this may seem like an ordinary point, but in reality, this line is a huge pressure zone.
Since 2016, the Shanghai Composite Index has made several attempts to break through 3,700 points, but to no avail. The pullback of the market is precisely because of the existence of this pressure level and the concentrated exit of the market's short-term profit-taking orders, which led to a collective decline this week.
Two important signals have arrived
While most investors panic when the market fluctuates dramatically, the nature of the market hasn't changed. The bull market is not over, but has only temporarily entered a period of correction. The editor believes that two important signals will affect the future trend of A-shares.
Signal 1: The formation of a chip peak
As you can see from the chip distribution chart, the chips around 3674 are very densely distributed. This is not only due to the large amount of new entrants gathered here, but also the old chips that have been held for a long time are also stuck in this position. Such a high density of chips means that the selling pressure at this point is very heavy.
For the market, such a chip peak means that it will be difficult to break through this level in the short term. After all, a lot of funds are trapped here, and there is not much incremental capital in the short term to dare to enter the market on a large scale in this uncertain market environment. This also explains why the market quickly pulled back after hitting 3700 points.
Signal 2: The gap below is worrying
In addition to the chip pressure above, the gap below the market also has to be mentioned. The gap theory in the A-share market has always been a signal that is difficult to ignore, and many times the gap will be filled by the market. There are a lot of continuity gaps in the current market, and these gaps will have an impact on the market sooner or later.
Gaps in market continuity are often the result of excessive short-term volatility, reflecting the inherently structural instability of the market. If these gaps are not filled in time, they will become a hidden danger for the market to rebound in the future. Therefore, in the short term, the market may still need further shocks and shuffling to provide a healthier basis for the subsequent market.
The pause of the bull market and the outlook for the future
On the whole, the current A-share market has not completely entered a bear market. On the contrary, this pullback is more like a "pause button", giving the market a chance to breathe and adjust. After the previous rally, the market needs time to digest the pressure on the chips above and also time to fill the gap below. This adjustment is not only normal, but also necessary.
In the future, the market may no longer rise and fall as often as in the past, but pay more attention to the steady inflow of funds and the optimization of the structure. Over time, the chips above will gradually disperse, and the gaps below will gradually be filled. When these problems are solved one by one, the bull market road of the A-share market will open again.
For investors, during the market adjustment period, it is more important to look at short-term fluctuations rationally and avoid emotional operations. The current market is not suitable for blindly chasing the rise and fall, but should remain calm and wait for the market wash to end before making a decision.
Conclusion: What do you think about the future of A-shares?
What do you think about this? Welcome to communicate in the comment area!
(Disclaimer) The process and pictures described in the article are from the Internet, and this article aims to advocate positive social energy and no vulgar and other bad guidance. If it involves copyright or character infringement issues, please contact us in time, and we will delete the content as soon as possible! If there is any doubt about the incident, it will be deleted or changed immediately after contact.