Hexun Investment Advisor Gao Luming: Dropping again! Should I run?

Nearly 4,500 stocks declined, the three major indices surged higher, then suddenly plunged during trading. Has the market rebound ended? Should we sell now? Gao Luming, an investment advisor at Hexun, believes that the current rebound has not yet ended, and the decline presents an opportunity to buy the dip again. Today’s decline is an important price difference point because, on one hand, the market initially surged but then pulled back, especially as news of increased tension from overseas re-emerged during the session. The three major indices experienced a sharp drop, with the final results showing significant declines. The Shanghai Composite Index fell over 1%, the Shenzhen Component Index dropped more than 1.4%, and the ChiNext Index declined over 1.3%. This indicates that the selling pressure remains strong.

However, we also notice that during today’s plunge, trading volume did not increase; instead, it shrank significantly. The combined trading volume of the Shanghai and Shenzhen markets shrank by over 230 billion yuan. What does this mean? Even with negative external news, major institutional funds did not exit the market; rather, they showed a reluctance to sell, indicating that funds are not leaving en masse.

If large funds were exiting heavily, we would see volume staying the same or even increasing, but that did not happen. This suggests that these major funds have not fully withdrawn. Since they haven’t exited completely, there is still a chance for the market to rebound.

Second, during today’s session, we even saw a MACD indicator bottom divergence again, indicating that major funds are starting to accumulate through a suppressive approach. Remember Monday? The market experienced a sharp drop, with a decline of over 140 points. We clearly stated that the market was brewing a rebound and that it would come soon. As expected, a rebound began on Tuesday, mainly because after 1 p.m. on Monday, the indices hit new lows, but MACD showed a clear bottom divergence, signaling potential for a rebound. Today’s similar situation suggests that funds are entering again during today’s plunge, which helps support a continued upward correction.

Third, the market has not broken below previous lows, which is necessary for a true reversal. To confirm a reversal, the market must break through those lows, but that has not happened yet. Therefore, overall, I believe the rebound is not over yet. After a correction, it’s a good opportunity to buy the dip again.

Today’s market is a price difference point because, after a series of rebounds, the market has started to fill the upper gaps and is experiencing a pullback. This is a good chance to sell high during the rebound and buy back after the correction.

So, what should we do now? It’s simple. As I mentioned earlier, if you hold stocks that have surged and are not moving higher, you can consider taking some profits today, waiting for the market to pull back, and then re-entering at lower prices. Since the market has not broken the lows, there is still room for the rebound to continue.

I want to emphasize that if you are looking to add positions or increase holdings, you should wait a bit longer. The current rebound, starting from Tuesday, is just a short-term bounce, not a major reversal or bottom. Until major institutional funds start entering in a sustained way and trading volume increases significantly, I recommend keeping your positions light to moderate, as we discussed on Tuesday. Do not over-allocate.

For those heavily invested and still holding positions without profit, if the market only recovers slightly, there’s no need to cut losses yet. Tomorrow’s market will be crucial. The rebound could end within two days if conditions improve, or it might extend into the first half of next week.