He Xun Investment Advisor Li Wei: Volume Contraction and Broad Rally! How to View Sustainability

March 24th, today’s correction or small rebound, what do you think? Is it sustainable? Li Wei, an investment advisor at Hexun, analyzes that if we look purely at today’s data, with over 5,000 stocks in the red and about 100 stocks hitting the daily limit, the data seems very, very good. Does this mean a reversal is coming? But looking at the trading volume, we see that there’s no real buying power bottom-fishing. The total transaction volume is 2.1 trillion yuan, which, compared to yesterday’s increased volume, has actually shrunk by 350 billion yuan. So, the less the volume, the better the market’s feeling seems to be, with over 5,100 stocks in the red. It’s just a small emotional correction.

Considering that this volume is spread across more than 5,100 stocks and over a hundred limit-up stocks, it’s natural that tomorrow might see a pullback. Many stocks are not driven by spontaneous or self-motivated bottom-fishing or buying momentum. Since the buying and selling volume isn’t driven by genuine demand, the sustainability of this rebound is questionable. I remain skeptical based on the volume data.

Looking at the closing rally today, the main force was in the late trading session. The morning market, including intraday, was still within the middle range. On the 5-minute chart, the market opened high in the morning, then rebounded and fell back. The real strength came in the afternoon with a stretch upward, pushing the index out of the middle range. Who drove this afternoon’s upward push? The semiconductor sector’s intraday trading. Semiconductors also closed with a doji candlestick, indicating no strong bottom-fishing funds, and volume was also shrinking. The structure of semiconductors is similar to the Shanghai Composite Index: opening high, falling to new lows, then rebounding and falling again, with a late surge. There’s a saying: “A late rally is either treachery or theft,” right? So, I remain doubtful about the sustainability of today’s late surge.

Since semiconductors showed a rally at the close, let’s review these stocks from a transaction volume perspective. The leading stocks in semiconductors today are not large-cap stocks, which raises further suspicion. The stocks leading the rally are not high in market value or trading volume. Could this be a low-absorption strategy triggered by quantitative trading? After being triggered, it spreads out, causing the index to have a false appearance of prosperity at the close.

Overall, this situation is uncertain regarding sustainability, and there are no clear buy signals in the structure. During our morning live session, we discussed that if the market had formed a strong K-line today, funds would naturally look for opportunities tomorrow. But in the morning, the market only moved slightly, without much strength. From a spontaneous repair perspective, there’s no genuine bottom-fishing volume; volume is shrinking, and external stimuli or support are unclear. So, overall, the market is not at a good point for action now. Some might think it’s a rare opportunity to buy the dip, but it’s important to view it dialectically.

In the morning, we also talked about keeping your positions light. When a cycle is about to shift, early on, the expected returns or market outlook are usually not very high. Remember to set stop-loss and take-profit levels and only trade if you’re comfortable. From my perspective, this isn’t the right time for a big push; just continue to observe and wait.

Regarding today’s hot sectors—power grid, photovoltaic, computing power leasing, data centers, even robotics and military industry—these showed some performance. From a concept perspective, the military, power, and power grid equipment sectors, along with many small hot spots, show a pattern of random stretching. Behind this might be quantitative trading. Yesterday, there was a lot of short-term selling, and today, quantitative traders are again making low-absorption moves and spreading out. This back-and-forth manipulation is very difficult to operate. There’s not much attention on these hot spots, and it’s not worth focusing on them. Until the overall market environment or index outlook improves, it’s best to remain cautious and skeptical.

If the market’s trend and structure fully recover later, and market sentiment gradually returns, then it will be time to act and look for opportunities. But right now, it’s not the right moment.