The fighting hasn't stopped, and the A-shares are struggling to rise: How to understand this situation?

Do not say that there is no market in April; performance is the shield that guards our original intention. [Taoguba]
When the smoke of war clears, only then will we see where the true gold is to be found.

The war in the Middle East continues to spread; March was just the beginning, and greater confrontations may only start in April. Trump’s words are deceiving; just a day after he announced a pause on striking Iranian energy facilities, we woke up to see Israeli and American warplanes attacking Iranian nuclear facilities, power plants, and steel mills, using various tactics to lure Iran into a false sense of security. Fortunately, after suffering painful lessons earlier, Iran has become wiser and understands Trump’s intentions, avoiding falling into the trap. If the U.S. and Israel begin to strike Iran’s energy facilities, Iran will inevitably retaliate more fiercely. In March, everyone might have been relatively restrained, but if pushed to the edge, anything could happen; this conflict is escalating, and April is destined to bring bloodshed and chaos.

From the development of the war, it is destined to be a bloody battle with no end in sight, and it is unlikely to end in the short term. Even if the U.S. and Iran can reach an agreement, Israel and Iran will not stop fighting; this is a battle for survival, and there will certainly be a showdown. As of now, the U.S. and Israel have not suffered significant losses; it’s still a tit-for-tat situation, relatively restrained. But this situation won’t last long; April will break it. The biggest pain point for the U.S. is crude oil. During this time, Trump has kept U.S. crude oil prices stable at $100. If oil prices cannot be maintained and rise sharply, it will break the U.S. defenses. If Iran can drive oil prices up to $150-$200 and maintain that for a while, the U.S. will be completely vulnerable, which would also deal a heavy blow to the global economy. This scenario is something no one wants to see, and in the end, it will depend on which country can endure. At that point, the U.S. may resort to underhanded tactics. We all experienced the pandemic in 2019, and in the absence of nuclear options, a quick end to the war would mean biological warfare. If that breaks out, it would be even more intense than in 2019. Not only the Middle East but we will also be affected; this is just a personal preemptive thought, hoping we don’t reach that point.

Based on the trajectory of international developments, as long as the war continues, the financial market will not see significant movements. If the index can hold above 3,800 points in April, it would be strong; if weak, there may be another drop in April. Earlier this year, I also analyzed that this year’s market would experience a large oscillation, fluctuating 500 points around 4,000.

Reflecting on my early February predictions regarding the international situation and the market,

It is now quite clear,

This is the interesting aspect of the financial market; we can forecast market trends based on changes in the international situation, and we can also infer changes in the situation based on market trends. Essentially, the world, between countries, companies, and individuals, is fundamentally a game of interests, and the financial market is a relatively objective carrier through which ordinary people can directly understand this game. By understanding the language of the market, one can see the larger trends. Just like the timing of the end of the U.S.-Israel-Iran conflict, we don’t need to understand what the leaders say or guess; we just need to keep an eye on international crude oil prices. When the war ends or its impact decreases, oil prices will inevitably drop. When one day oil prices fall below $80 or lower and remain stable without a significant rebound, we will have basically reached the end. The essence of this war is an energy struggle; although the battlefield is in the U.S., Israel, and Iran, the final game of interests is in the financial market, in crude oil, affecting global economies through the fluctuations driven by the war. Every confrontation in war will objectively reflect on the oil price chart. Therefore, studying the financial market more is of great significance.

Returning to A-shares, the overall market tone is set: range oscillation and structural trends. For the past 10 years, A-shares have fluctuated around 3,000 points. After the National Day in 2024, there was a surge that broke out of this 10-year deep pit, reaching 4,000 points. In the coming years, the index will likely fluctuate around 4,000 points, representing a slow bull market for A-shares. It may not follow the trend of a gradual increase as many think, but rather oscillate upwards on an annual basis. For A-shares this year, there shouldn’t be many good opportunities in the first half; for the market to move, there must be driving forces, either significant policy benefits, new capital influx, or stable geopolitical situations and economic upturns. In simple terms, it needs capital support, and given the current situation, with external conflicts continuing and the potential for war to spill over, there is no stable investment environment. At this time, people may be more conservative and unlikely to allocate much to high-risk assets. For the market to rise, relying on existing market capital is not enough; new incremental capital must come in. Where will this capital come from? That is a question. From a policy perspective, during times of international turmoil, the country’s overall strategy focuses on stability and will not introduce aggressive policies to stimulate the market. At this stage, the priority is to stabilize the market and prevent systemic risks.

From the market’s perspective, when the index is at 3,000 points, total trading volume in the two markets can generally be maintained at around 800-1,000 billion. When the index is at 3,500 points, total trading volume must be at least 1.5-2 trillion to be sustained. For the index to stabilize at 4,000 points, total trading volume must reach at least 2-2.5 trillion. This means that to continue rising, the market size must grow larger and require more capital to stabilize it. However, the total number of investors in the market is limited; with over 200 million retail investors, most are losing money, meaning existing capital is decreasing. Without new capital inflow, the market finds it difficult to perform significantly. Although quantitative easing may provide 500-1,000 billion in liquidity, this capital mainly engages in high buying and low selling, only providing intraday liquidity without forming a collective force for a specific period. Therefore, the index is likely to remain oscillating for a long time, with local structural trends in sector rotations.

From the main upward trend since the National Day in 2024, the core technology sector has nearly tripled, and many tech stocks have risen by 3-5 times. Looking at it as a bull market, it is relatively similar. Taking the 2014 bull market as an example, the leading sector, the internet sector,

The highest increase during this main rise was just over 3 times. In this wave of 2024, most sectors have at least doubled, with the strongest leading sector CPO,

After the National Day, it has also increased by 2.5 times, with the market’s biggest bull stocks in this sector,

This sector also has the most hundred-dollar stocks,

In this wave of technology stocks, the funds mainly gathered around CPO. From a larger perspective, it is still in the primary upward trend on a monthly chart, but many individual stocks have tripled or quintupled, and the speculative expectations have basically reached their peak, with fundamentals and stock prices showing significant divergence. We can consider this: if the market continues to rise and the tech stock trend continues, the core of technology, CPO, will still be the leading driver. If it continues to rise, these stocks must soar, relying entirely on hard capital push. Who will buy at such high prices? Ordinary retail investors rarely buy hundred-dollar stocks.

At the same time, we also need to think about why capital chooses to gather in the CPO sector. The attributes of this gathered capital and the operation cycle, we should think in broader terms, indicating a fundamental change in investment style in the A-share market. For the past 30 years, super large funds gathered around value blue chips, with the liquor sector as the anchor,

Consumer blue chips have experienced nearly 30 years of bull markets. Since 2021, large funds have begun to withdraw from value blue chips, and the liquor sector peaked and fell back. After this capital withdrawal, it went where? The answer is simple: to the technology sector, with the core anchor being the CPO sector. This means that capital has shifted from value blue chips to tech growth stocks; these are two different styles. Value blue chips invest based on the growth of the companies themselves, while tech growth invests based on future growth expectations. Therefore, we need to think about whether this capital operates on a 5-10 year cycle. If so, the current wave of increases in the CPO sector may just be the early stage of the rise, with even greater explosions to come. If this capital’s operating cycle is only two or three years, this year could see a significant pullback.

From the broader market perspective, I personally feel a bit uncertain about the overall direction, including the index direction. What I can see is oscillation, with no driving force to attack 4,500 points or 5,000 points. As for sector direction, the tech sector has realized its gains from the wave since the National Day in 2024, with core index sectors rising by more than double and most individual stocks increasing by 3-5 times. Is there logic for it to continue rising and doubling again? However, currently, the tech sector is still in an upward trend, and large funds have not withdrawn, so it is quite awkward. There is potential for further growth, but that certainty has diminished, meaning it may be suitable for short-term or swing trading, but not for long-term holding. I personally feel that this year’s market will be challenging; the direction is still unclear, and we may need to wait until after April and see if there are any new changes. Historically, April is often a poor month for the market, with a phase of mass annual report releases + external conflict escalation + reduced liquidity, so one must be vigilant, especially for high-flying tech stocks, as the earnings “mirror” may expose some stocks’ true nature.

Finally, to share this month’s operational thoughts, the core point is timing; the old method still applies. The three major indices should be approached when above the 5-day moving average, and if the index breaks below the 5-day line or falls below it, one should decisively hold back and avoid unnecessary actions. As for stock selection, focus on stocks with clear performance indicators, as April is a concentrated earnings disclosure period. During this phase, the main line of speculation usually centers on performance growth and exceeding expectations, focusing on stocks with performance growth + hotspot resonance. Specifically, for stocks expected to perform poorly, pay attention to avoiding them before earnings announcements.

The stock selection approach and timing mainly involve two situations: one is the counterintuitive growth in performance, selecting stocks with performance growth or significantly exceeding expectations; the particularly strong ones may not be available for purchase on the day of the earnings announcement. What you need to focus on is the performance growth of individual stocks, especially if they spike on the announcement day and then retreat or decline. Track these stocks for 3-5 days, and when they drop and then rebound, you can intervene accordingly. Some main players often use this point to wash out weak hands or are impacted by index declines on the announcement day. The other situation is counterintuitive performance downgrades or losses; that is, when a poor performance stock does not drop but instead rises on the announcement day. You can intervene at that time or observe for a day or two before entering, especially if it can withstand the index’s decline while still falling short of expectations.

That’s all I want to share; April, a month full of events. Hold your hands, and wait for the wind to come.