Many have heard the saying: "Markets are born in despair, rise in hesitation, and end in madness." This phrase perfectly captures the recent A-share market trends:

(1) Brewing in Despair

Before September 24th, the market had been unilaterally declining for over four months, with the index once falling below 2700 points. Market turnover shrank to around 500 billion, and many individual stocks hit new lows for the year. Investors were almost exhausted and worn out, with some even closing their accounts, vowing never to invest in A-shares again.

(2) From Hesitation to Climax

On September 24th, the State Council Information Office held a press conference on financial support for high-quality economic development. The "three financial giants" - the central bank, the financial regulatory authority, and the securities regulatory commission - gathered together and released a series of significant policies that exceeded expectations, quickly igniting market sentiment. That day, the non-bank financial sector saw a surge in stock prices, and market turnover increased from over 550 billion the previous day to nearly 1 trillion. The Shanghai Composite Index rose nearly 100 points intraday, catching many off guard. However, many still considered it a rebound from an oversold market. The subsequent rise and fall on September 25th seemed to fit the pattern of an oversold rebound.

Advertisement

On September 26th, the Political Bureau of the Central Committee held a meeting to analyze and study the current economic situation and to plan the next steps for economic work, releasing another series of positive signals that exceeded expectations. As a result, market expectations made a 180-degree turn, and equity assets that had regained attention were snapped up by a flood of capital. The real estate and liquor sectors, which are significant weights in the A-share market, collectively exploded, and the Shanghai Composite Index surprisingly showed a long bull line that had been absent for a long time, directly reclaiming the 3000-point territory that day.

In the last two trading days before the National Day holiday, the market continued to soar, making up for the cumulative decline of the previous four months. The single-day maximum increases for the Shenzhen Component Index and the ChiNext Index reached astonishing 10.67% and 15.36%, respectively. Market turnover directly expanded to 2.6 trillion, with capital rushing in, and everyone shouting "bull market," with market sentiment reaching an unprecedented climax.

(3) The Loneliness After Madness

On October 8th, after the "longest National Day holiday in history," all investors were looking forward to the opening of the A-share market. After all, during the holiday, the Hong Kong stock market continued to be strong, and the FTSE China A50 futures index rose by more than 10%. Self-media were promoting the "arrival of the bull market," and securities firms did not close during the holiday, meeting investors' account-opening needs online and offline. Even many people who had never been in contact with the stock market before were eager to open accounts. Some financial influencers even shouted, "It is expected that after the holiday, the A-share market will open and close, and you can go off work early." The pursuit of the "bull market" across the country was almost frenzied.

Finally, at 9:30 a.m. on October 8th, when the market opened, there were indeed thousands of stocks near the limit-up price. Many people who had missed out before were afraid they couldn't buy and directly placed orders at the limit-up price to enter. However, the market opened high and closed low that day, ending with a very unfriendly "tombstone line." Market turnover reached the largest in A-share history at 3.5 trillion, an undeniable "sky-high volume." In the following three trading days, the market continued to violently adjust, and in just four trading days, the Shanghai Composite Index fell from 3674 points back to around 3200 points. The loss effect continued to be released, and turnover gradually shrank to around 1.5 trillion. Market sentiment cooled sharply. Many people who had been shouting "bull market" a few days ago fell silent at this moment.In just nine trading days, the market has staged a rare historical drama of extreme volatility, where although the overall market has seen a considerable increase, the situation of investors has changed dramatically: some have made a fortune, some have turned substantial gains into losses or even ended up in the red, some have suffered heavy losses at high levels, some still firmly believe that the bull market is ongoing, and some suspect that the bull market has already ended... I believe that both seasoned and new investors have been taught a harsh lesson by the market this time.

Of course, there are many aspects of this market trend that are worth reflecting on, and I would like to share my insights on two issues.

Firstly, why is it not easy to make a lot of money in a "crazy bull" market?

We know that the A-share market has always been characterized by short bull markets and long bear markets. Especially after more than three years of prolonged decline, people have been exhausted and mentally drained. As a result, many investors have gradually developed the habit of short-term operations to avoid being trapped for a long time. They tend to take profits as soon as they make a little profit rather than holding on. As a result, in the recent continuous bullish market, many people still failed to break free from the bearish mindset in time and took profits early. Little did they know that after selling, the stock price continued to soar, and they did not dare to get back on the train due to "fear of heights," leaving them no choice but to watch helplessly as they missed a significant portion of the subsequent increase.

Moreover, when market sentiment is soaring, people can easily be swept away by the surrounding atmosphere, seeing only the stock price rising and fearing to miss the opportunity to get rich. However, they often relax their vigilance against market risks and tend to buy high without thinking. Just like on the first trading day after the National Day holiday, countless investors rushed in, only to buy at the market's highest point. Unfortunately, they became the first batch of investors trapped in this bull market—actually, many small and medium investors are more likely to lose money in a bull market, and this is how it happens.

Because of this, we should learn to always maintain a sense of awe for the market, always prioritize risk control, and continuously learn and summarize. By strengthening our understanding and judgment of the market, we can choose investment targets with a higher probability of rising and relatively lower risks. In addition, we should continuously improve our cognition and grasp of policy orientation, industry logic, and company fundamentals, and then establish a suitable investment system for ourselves, rather than blindly following the crowd and echoing others. Only in this way can we steadily and sustainably accumulate wealth.

Secondly, why is this bull market a "crazy bull" rather than a "slow bull"?

To be fair, the continuous short squeeze in the market since September 24th has absolutely shocked everyone. In just six trading days, the Shanghai Composite Index rebounded by 900 points. Almost all aspects of the market, including the overall market, sectors, and individual stocks, have risen to a "dizzying" level, and many phenomena cannot be explained by fundamentals.

Why did such a violent surge occur? In my view, in addition to the repeated exceeding of expectations by stimulus policies, the market's severe undervaluation in the early stage, and investors' suppressed desire for a rise for too long, the acceleration of information dissemination also played a key role.

There is a famous joke circulating in the stock market: "When the vegetable seller on the street starts talking about the stock market, it means the bull market is coming to an end." The implication is that if even the most ordinary investors have determined that it is a bull market, it may mean that the last incremental funds in the market have begun to enter. When there are no more incremental funds entering, the buying power tends to weaken, and stock prices often have the potential to peak. In fact, looking back at the past few bull markets, vegetable sellers are usually the last to know about the arrival of a bull market, which is related to the channels of information dissemination.For instance, in 2007, the perception of a bull market was largely disseminated through public media and word of mouth. After all, the number of stock investors at that time was not large, and many people did not have access to investor friends. The channels for obtaining relevant information were also limited, and the slow spread of information, to some extent, was conducive to the emergence of a "slow bull" market. That particular bull market lasted for two years. Similarly, during the bull market in 2015, the spread of information between people was more through early social media platforms such as Weibo and WeChat Moments. Although the speed of information dissemination was much faster than in 2007, due to incomplete and unvivid information, people still needed some time to adapt and confirm their perception of the bull market. That round of bull market lasted for about nine months.

However, in the current era of explosive growth in mobile internet and the booming popularity of short videos and live streaming, the dissemination of market opinions has become extremely rapid and flattened, and the consensus among different groups of people is reached at a frightening speed. Under the sensational promotion and popularization of various financial bloggers, the cognitive gap between vegetable sellers and veteran investors has been greatly narrowed. Even novice investors can get a general understanding by casually opening Douyin or WeChat public accounts to watch the explanations of the bloggers. As a result, information that might have taken two or three months to spread in the past can now be quickly completed in just one or two days, which will indirectly lead to a shortening of the duration of market trends.

Take this National Day holiday as an example, information such as "thousands of stocks hitting the upper limit" and "the main board hitting the upper limit" have been fermenting wildly in various media, and almost everyone is discussing the bull market. This kind of scene that could only be seen at the end of the 2015 bull market has been demonstrated in just a few days. It is important to know that the market has reflexivity; if expectations are too uniform, the market often tends to go in the opposite direction of the uniform expectations—the market trend after the National Day holiday has proven this point.

Speaking of which, is the bull market still here? This is probably the most concerning question for everyone at the moment.

Let me first give a subjective judgment: the period of "everyone is a stock god" a few days ago has completely ended. Next, the market will enter a stage of wide-range fluctuations, and it will be difficult to break through 3674 points in a short time. There are three reasons for this:

Firstly, this "crazy bull" market originated from a package of policies that exceeded expectations, a sharp reversal of market expectations, and the fervent emotions of a large number of investors. As the market evolves, when market expectations and emotions are fully digested, it will inevitably gradually return to rationality. At this time, whether the fundamentals can improve will be crucial, and it will be the cornerstone supporting the market's long-term bull trend. Considering the time lag from policy announcement to effectiveness, the repair of the economic fundamentals and corporate profitability is destined to be a long and tortuous process. If subsequent economic data cannot show obvious signs of improvement, market confidence will inevitably be frustrated again, and the market trend will naturally find it difficult to continue to attack upwards.

Secondly, the highest point of this round of market trend was 3674 points on October 8th, with a transaction volume of 3.5 trillion, a historical record, which can be described as an "ultra-high volume." If analyzed from the perspective of volume and price, ultra-high volume means that there is a big difference between bulls and bears, and huge volumes at a stage high position often come with the selling of large funds and the trapping of funds bought on that day, especially after a period of rising volume with a medium to large bearish candlestick, it is even more so. According to historical experience, this kind of trend is mostly a sign of a market stage top, hence the saying "ultra-high volume sees ultra-high price." To go further, on October 8th, there was an ultra-high volume of funds trapped, and once the market rises to the vicinity of that day's bearish candlestick, it will inevitably face huge selling pressure, which dooms 3674 points to become a strong pressure position for a long time in the future. Unless there are more significant benefits and more abundant funds entering the market, it will be difficult to digest the trapped positions at 3674 points in a short time.

Thirdly, although the market has been continuously adjusted after the National Day holiday, it has not destroyed the upward trend that has been formed, and the bull arrangement of moving averages is the best proof. Once an upward trend is formed, it is difficult to be reversed in the short term, and under the upward trend, each time the market stabilizes after a pullback is a good buying point. Considering the strength of this package of policies, it is indeed rare and beyond expectations, so it is a high probability event that the national economy will continue to improve, and therefore, the overall direction of the market should be mainly fluctuating upwards, rather than a one-sided decline.

As for the question of "whether the bull market is still here," I just want to say: the bull market has never been shouted out, but walked out. Instead of blindly looking forward to the arrival of the bull market to make a big profit, it is better to lower expectations, respect the present, and take every step solidly on the basis of recognizing oneself, and everything that should come will naturally come.