A-shares: Major Stocks Surge Abruptly
A-shares demonstrated a relatively stable performance today, avoiding the erratic fluctuations often seen in the stock market. Although there was a sharp uptick during the trading session, an important underlying factor needs consideration. Analyzing today’s trends and anticipating tomorrow’s trajectory can be approached through a few key observations.
First and foremost, the stability in A-shares predominantly stems from the performance of significant index stocks. So, what signals do their movements convey?
As mentioned in yesterday's article, the focus was on the movements of major stocks like those in the oil and banking sectors. This morning, the banking stocks exhibited unusual activity, maintaining a robust stance. Around 10:30 AM, they began a fluctuating rise. However, while they helped to prevent a considerable decline, they were unable to drive the A-shares higher due to a lack of strong support. Consequently, the A-share index experienced a plunge later in the afternoon.
At precisely 2:00 PM, the market giants reignited a surge in the securities sector, causing a dramatic rise that brought stocks like Kweichow Moutai, oil, coal, and insurance up swiftly. This collective support momentarily lifted the A-share index, pushing the Shenzhen market into positive territory. Yet, this was indicative of a key player attempting to stabilize the market, only for the Shenzhen index to retract shortly after, showing that the speculative stocks were indeed responding to the bigger players yet simultaneously heading towards a downturn.
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In a broader context, the main players in the A-share market displayed remarkable precision in their control over market movements. As mentioned at midday, they are akin to masters of technical analysis, executing trades with pinpoint accuracy.
It is vital to highlight that banks, oil, and other significant stocks have been in a prolonged horizontal trading phase. Their rebound is a dual reflection: it indicates a necessary reaction to their own technical demands and a measured response to adverse market conditions. In particular, the FTSE A50 futures and Hang Seng Index are predominantly influenced by domestic capital with minimal foreign investment involved, making the stabilization of A-share index advantageous for overseas markets.
Large index stocks are pivotal within A-shares, and their rises and falls have profound implications on the market's overall trajectory. Generally, these index stocks fulfill three roles during market trends: they lead the charge at the beginning of a rally, serve as the stabilizers mid-trend, and take the initiative to secure profits at the tail end.
These three roles will not be discussed in detail today, as the behavior of major stocks has already been clearly articulated. Although there was a concerted effort from major players, the intensity of this movement was rather moderate, signifying a protective nature rather than a bullish push.
Secondly, today’s trading data for A-shares paints a less than favorable picture, which could constrain the index’s movements tomorrow.
Specifically, the trading volume was disappointing, especially following yesterday's spike. Both ups and downs typically warrant an increase in trading volume. The decrease in volume today indicates that investors were unwilling to chase high prices, with many retail investors opting to hold stocks in anticipation of price increases.
Significantly, as A-shares approached a prior resistance level around 3400 points, the lack of accompanying volume means there isn't sufficient new capital to propel an effective rally. When major index stocks are elevated, it requires relatively less capital because these stocks possess limited circulating shares, allowing significant players to influence prices according to their desires.
This trend is made evident by the outflow of capital in the A-share market: the net capital outflow reached 62.7 billion yuan today, an increase of 20 billion yuan compared to the morning's 42.7 billion. This was further highlighted by a net outflow from the artificial intelligence sector, which totaled 10 billion yuan in the morning and increased to 15.8 billion yuan in the afternoon, with other sectors including domestic chips and new energy vehicles also experiencing significant capital losses.
An analysis of historical capital flow trends in A-shares suggests that a day of significant net inflow is often followed by over a week of net outflow, typically amounting to hundreds of billions of yuan.
Moreover, as we moved into the last hour of trading this afternoon, while the main index maintained stability, major capital was actively exiting, indicating that this could adversely affect yesterday's bullish trend.
Lastly, examining the technical movements on the A-share index implies that a correction is necessary for tomorrow. This corrective action could facilitate more substantial growth moving forward.
Today’s behavior aligns with a previous prediction: the index is expected to fluctuate within the range of 3200 to 3400 points. The A-share market closed above the 20-day moving average, suggesting that the current upward momentum has reached its limit, which is reinforced by the rather honest movements of the Shenzhen index.
Looking ahead, the A-share market is likely to retest the 3350-point mark, lingering around the 20-day moving average, with anticipated fluctuations between 3350 and 3380 points. The major index stocks are expected to remain active.
If the past few days characterized a 60-minute trend repair, it is now time for the daily indicators to undergo restoration. The daily short-term technical indicators have already reached overbought territory, necessitating a short-term correction.
Additionally, it's worth noting that while there's speculation suggesting that we've entered a bull market since October 8, the prolonged horizontal trading of A-shares has gradually eroded the bull market's foundations. Trading volumes remain above one trillion yuan, but this resembles a stone thrown into the water where ripples fade over time. Bull markets do not wait; major shareholders prioritize cash flow over retail investors, leading to new stock listings taking precedence over individual gains.