Hexun Investment Advisor Gao Luming: Has the reversal happened? Should we add to our positions?

Driven by positive external news, the three major indexes opened higher, then consolidated and rose. Nearly 4,500 stocks advanced. Has the market reversed? Should we add to our positions right now?

Hexun investment adviser Gao Luming said: First, I’ll share my view. I believe that so far, the market still has the characteristics of a rebound. On the one hand, we can see that yesterday, everyone noticed that the external environment suddenly eased, and the US and European stock markets surged. China concept stocks also jumped sharply, and today the major Asia-Pacific stock indexes are also up across the board. However, under such a large positive impact from the outside, and with overall sentiment moving upward, the market’s upside momentum has not fully been reflected. As we can see, during today’s early session, the market opened clearly higher, with the opening gap reaching 47 points. But afterward, after consolidating through the close, the index ultimately only closed up 56 points. What does that indicate? During the early-session high-open process, most of the gains had already been realized. During the consolidation—especially intraday—these main funds did not continue to aggressively go long. If the main funds, after a high open, were willing to go long in a sustained way, there would likely have been an expansion in gains, possibly with ranges of 70 points or 80 points. But judging from the fact that such magnitude did not appear, it indicates that the attitude to go long is still not very strong.

Second, we also see that the main funds’ willingness to enter the market is not sufficient. When we open today’s intraday chart, we can see that after today’s early high open, especially during the later consolidation and rally phase, market trading volume once expanded to more than 800 billion. However, as the index continued to consolidate, trading volume shrank instead. Even near the midday close, trading volume had already shrunk by 100 billion to 200 billion. Then although the market saw another round of fund inflow again near the close, the inflow amount was only around 200 billion. What does this mean? During today’s strong market performance, the willingness of funds from outside the market to enter is insufficient—especially for these large main funds. If large main funds intended to enter, and if they truly had high confidence in the outlook, they would certainly show clearly increased position-taking and inflow. At this time, volume would at least expand by several hundred billion, or even more than 1,000 billion to 2,000 billion. But based on what we’re seeing now, this situation has not appeared. That suggests that during the rise, there is still some hesitation on the part of the main funds here, and it also means it’s difficult to change the market’s rebound character into a true reversal.

Third, the performance of big-weight sectors is also insufficient, and the money-making effect is not particularly good. Even though nearly 4,500 stocks rose today, you should also have noticed that the main product categories’ gains are mostly in the 0% to 3% range. And as we see with sectors such as non-ferrous metals, as well as brokerage, and insurance— they basically opened higher and stayed near the highs, repeatedly consolidating here without continuing to exert strength. Also, we see that many technology sectors experienced pullbacks, which instead created a certain impact on market sentiment. So, looking at it comprehensively, I believe that so far, the market is still essentially in a short-term rebound trend driven by a sudden burst of positive news—continuing that upward push.

(Editor: Shao Xiaohui)

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