Hexun Investment Advisor Gao Luming: The three major indices surged and then plunged; when will the decline end?

The three major indices surged then plunged again. Is the market entering another decline? When will we see a bottom and a rebound? Should we sell now? Gao Lu Ming, a Huoxun investment advisor, analyzes that from the market perspective, the biggest concern today has indeed occurred. Yesterday, we discussed how the market showed signs of a bottoming out and a rebound, indicating there would be an upward push today. However, as long as the brokerage, insurance, and other heavyweight sectors do not gain momentum—especially if trading volume does not increase—the market will find it difficult to form a bottom and start a rally.

As expected, during today’s trading, although securities and insurance sectors did begin to boost the indices with a push upward, trading volume not only failed to expand but shrank significantly. During the upward move, volume dropped by over 140 billion yuan, indicating that funds outside the market are not entering; instead, there is a false appearance of rising prices driven by speculative buying.

This alone is not a good sign. Later, as the indices fluctuated until midday, trading volume further shrank to over 230 billion yuan, and the market’s cautious sentiment intensified. Outside funds are reluctant to enter. During our live broadcast, we said there was a high probability of a sharp decline. Subsequently, the indices fell back, with trading volume increasing during the decline. Although the Shanghai and Shenzhen markets still saw a total volume of over 110 billion yuan shrinking, more than 120 billion yuan of funds exited during the decline.

If major funds continue to sell off, it indicates that the short-term correction has not ended, and further declines are likely. Additionally, today’s market correction intensified. After yesterday’s bottoming and rebound, the overall decline was only about 10 points. But today, the Shanghai Composite Index closed down by 34 points, a medium-sized bearish candle, while the Shenzhen Component and ChiNext indices showed even larger bearish candles. This suggests that the short-term downward momentum remains strong, and the correction is not over yet.

Third, during this morning’s live broadcast, we mentioned that for a rebound to turn into a new upward trend, the market must break above the 4106-point level and the nearby 10-day moving average. If it cannot break through or only barely does so, the market’s bottom cannot be confirmed. Now, the result is clear: the index reached around 4106 points, hitting multiple moving average resistance levels, but then fell back. The moving averages are now exerting downward pressure, and today’s market has broken below the recent 60-day moving average, around 4066 points. This indicates that the short-term correction has not ended.

Furthermore, although traditional sectors showed some momentum today, the enthusiasm was weak. Energy stocks and some tech stocks, which previously led the rally, have started to decline, reflecting weak short-term sentiment. Overall, the market is likely to undergo further adjustment in the near term. The next support level is around 4,000 points and the 120-day moving average, where a rebound might occur.

So, what should we do now? As we discussed in this morning’s live broadcast, since the market lacks volume and although there was a brief surge during the day, this does not mean there is an opportunity to buy in. Our view remains unchanged: do not rush to bottom-fish or enter the market now.

Additionally, since the current market is still rotating, some low-priced stocks may rebound temporarily, but only those at very low levels or just beginning to move have a chance. For stocks that have surged but remain stagnant, it’s better to take profits and sell. The market remains weak, and most stocks are likely to decline again. Our priority now is risk prevention. It’s safer to reduce positions to a moderate or below-moderate level.