A-Share Market: High Volume, Low Open, Reason Found, Tomorrow's Trend Prediction

2024-06-06 66 Comments

After the National Day holiday, the Hong Kong stock market and the FTSE China A50 Index soared, with a surge in account openings indicating an exceptionally hot opening.

The Shanghai stock market opened with a stunning limit-up position, followed closely by the ChiNext and STAR Market with astonishing increases of 18.44% and nearly 20% respectively, a rare occurrence in history. However, such a unanimous bullish sentiment also sowed the seeds for a potential plunge. After the opening, the major indices quickly retreated, with the Shanghai Composite Index sharply sliding from a high of 10% to near 1%.

On October 8, 2024, China's A-share market experienced an unprecedented trading day. On one hand, the total transaction volume of the market soared, approaching the historical peak of 3.5 trillion yuan, showing a spectacular scene of frantic capital inflow; on the other hand, the net outflow of domestic funds for the whole day reached nearly 220 billion yuan, also setting a new historical record, revealing the grim reality of major funds accelerating their exit. This phenomenon of surging transaction volume and a large-scale retreat of domestic funds undoubtedly brought great confusion and unease to investors. Does this indicate that the short-term market is about to peak, or is it a violent shock and washing in the journey of a bull market?

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Reasons behind the market's high opening and low closing:

(1) The impact of fluctuations in the external market

During the National Day holiday, the A50 Index and the Hong Kong stock market performed strongly, but回调 occurred today. This reflects, on one hand, the natural technical adjustment that occurs after a rapid rise in the market; on the other hand, it may also be some institutions trying to convey negative emotions to A-shares by shorting the A50 and other means, thereby affecting the overall market atmosphere. Although it is difficult to directly smash the A-share market, exerting indirect pressure by manipulating related markets has become a strategy.

(2) The cautious attitude of veteran investors is highlighted

For many experienced investors, the current high market opening provides a rare opportunity to lock in some profits or adjust positions. Especially for those who have already laid out their positions at lower levels in the early stages, they are more inclined to adopt a conservative strategy to protect their existing achievements as they see their accounts gradually turn from loss to profit. Meanwhile, newly entered funds show a more positive attitude, forming a sharp contrast between the two.

(3) Active cooling may indicate a trend towards healthy development

From a macro perspective, it seems that the regulatory authorities intend to guide the market back to a rational development track through a series of measures to avoid potential risks brought by overly rapid increases. For example, strengthening the supervision of bank credit funds flowing into the stock market and other measures all indicate that the authorities hope to see a long-term stable rather than a short-term sharp rise and fall situation. Therefore, today's trend is more like cooling down the overly hot atmosphere, rather than signaling the end of this round of increases.Massive Trading Volume and Capital Flows: A Look at the Future Outlook

Behind today's record trading volume in both markets lies a complex pattern of capital games. On one hand, a large number of new investors, carrying fresh capital, are flooding into the market, providing a continuous source of momentum for subsequent increases. On the other hand, there are quite a few profit-taking positions that have chosen to temporarily exit and wait on the sidelines, leading to a certain amount of selling pressure in the short term. However, it is worth noting that even such a large-scale capital outflow has not been able to stop the overall upward trend of the market. Instead, it may help to clear out some speculative and unstable funds, which is conducive to forming a healthier market environment.

It is expected that as more new account holders join the ranks of investors, A-shares will continue to maintain a high level of activity in the next few days. However, it is also necessary to be vigilant about the issue of sharp price fluctuations caused by an increase in emotion-driven trading. In the long run, only when market participants can maintain enough patience and focus on value discovery can they truly enjoy the sustained benefits brought about by improvements in fundamentals.

Conclusion: Rational View of Market Changes, Seizing Opportunities for Joint Development

In summary, although A-shares have experienced a more obvious process of opening high and closing low today, this does not mean that the current round of increases has come to an abrupt halt. On the contrary, it is more like a turning point - marking the market's transition from a phase of rapid increases to a new phase of more stable growth. In this process, both new and old investors should learn to adapt to the challenges and opportunities under the new situation, adhere to the concept of value investment without wavering, and jointly promote China's capital market towards a more mature direction. At the same time, it is also necessary to remind everyone to pay attention to the prevention of various risks, especially not to blindly follow the trend of buying high and selling low, to avoid unnecessary losses.

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