A-shares midday: Watch more, act less!!

After consecutive days of shrinking trading volume, the A-share market finally formed a freezing point today with a downward adjustment. Such a trend is entirely in line with the market's inherent characteristics. Yesterday, the market turnover fell below 1.7 trillion yuan, which actually sent a signal that the trading volume is no longer sufficient to support the index staying above 3,900 points for an extended period. Today, the index once again fell below 3,900 points, indicating that the market's volatile adjustment is not yet over in the short term. Therefore, for the broader market index, we shouldn’t have too high expectations in the short term; it is highly likely to maintain a volatile trend of repeated rises and falls. As for the ChiNext board, it is still in a volatile phase after a high-level pullback, with no signs of stabilizing yet. It seems it will take some time to digest the accumulated profit-taking.

Faced with today’s broad-based decline in the A-share market, many investors feel quite confused and even find this trend somewhat abnormal. However, in reality, this market movement is entirely logical. On one hand, continuous shrinking volume while still trying to prop up the market will inevitably lead to a broad decline. Think about it—propping up the market without sufficient volume is essentially a form of luring buyers, which cannot provide long-term support for the market. On the other hand, as some key time points approach, some funds that were previously restricted from selling are now unloading their positions without hesitation as the restrictions are lifted.

Under the current market trend, as long as we don’t blindly stay optimistic, we can take preventive measures in advance. We must clearly recognize that the market sentiment is currently in a retreat phase, and the overall market is still in a cycle of adjustment.

As for the future market, there’s no need to be too anxious. Think about it—the A-share market has been rising for several months in a row, and this wave of consolidation in October, digesting the chips, will actually be more favorable for the year-end market. However, the year-end market is usually dominated by defensive and stable strategies, so investors need to adjust their operational thinking in time. Previously, many people didn’t believe that sectors like banking, insurance, coal, and power could sustain a rising trend. Why? The core reason is that the tech sector has attracted a large amount of hot money for a long time, leading to a lack of confidence in market style shifts. But the operational logic of institutional funds is often like this: the fewer retail investors hold in a sector, the higher the probability they will push it up. Just like the tech sector before its big rise—retail holdings were particularly low, and once the trend started, follow-up funds poured in. Now, institutions have shifted their focus and started lifting undervalued blue-chip stocks.

The future market is highly likely to continue this logic: the rotation into undervalued blue-chips isn’t over yet, while high-flying tech and thematic stocks will continue to see repeated sell-offs in the short term. High-flying tech stocks may rebound after a pullback, but after the rebound, they might continue to slowly unload. The current decline in turnover is mainly because a large number of chips are locked in, and many investors have no choice but to "lie flat" and do nothing.

Now, the on-market funds are clearly showing a rotation from high to low, with a very obvious trend of style shift. In the short term, we shouldn’t dwell on whether the market has already formed a top or speculate on how high the index might go. Just remember that the current market sentiment is in a retreat phase. During this phase, we need to wait for trading volume and chips to stabilize before seeing which direction the market will choose. I suggest paying attention to the directional signals when the turnover drops to around 1.5 trillion yuan.

Currently, the style shift is mainly driven by on-market funds, while off-market funds are mostly still on the sidelines. Institutional funds have already positioned themselves in advance, gaining the first-mover advantage. Subsequent sectors will need to rise to a certain level to attract follow-up funds. If there’s an opportunity, you can continue to rotate from high to low, but at the same time, maintain patience and wait for the market to become clearer.