Hexun Investment Advisor Li Xuehua: Don't panic, today is not the reversal yet.

All stock market investors, please pay attention: today is just a rebound, not a reversal. Why do I say that?

According to an analysis by Li Xuehua, a Hexun Investment Advisor, we’ll start by looking at the indices. Today the broad market opened higher and moved higher, but in fact both the ChiNext Board and the Shenzhen Component Index opened higher and then fell. Although the sell-off wasn’t very large, from the perspective of the indices today, it can at most be considered a repair after yesterday’s sharp drop. Second, let’s look at individual stocks. Although today there are more than 4,000 stocks rising, which is a broad-based rally, if you look more closely you’ll find that for many of these stocks, the early-morning gap-up was already their intraday peak. So in terms of the overall price action today, we can only say that the market’s earnings sentiment has started to recover—nothing more than that.

Third, and most importantly, is trading volume. At first in the morning, trading volume expanded, reaching more than 800 billion. But by the close, volume expanded to only nearly 100 billion. This indicates that in the process from morning to the afternoon, trading volume was actually shrinking. Shrinking volume means the market’s buy-side initiative is relatively weak, and funds have little desire to chase the rally. Therefore, for today’s market, what we have is more of a rebound rather than a reversal.

Of course, because the broad market has already filled the gap above, logically there should still be room for an upward push from here. So it suggests there should be an additional premium for a higher move tomorrow. But if the broad market can’t break through the six-month moving average line above, then this position is very likely to adjust downward again.

(Editor: Shao Xiaohui)

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