In recent days, the A-share market has once again exhibited the familiar scent of a bear market from the previous period, with rapid surges followed by swift sharp declines, leading to a widespread drop in individual stocks and significant drawdowns in everyone's accounts. Faced with such a sharp decline, whether one is a newly entered novice investor or a seasoned veteran, there is inevitably some anxiety, and even doubts about the sustainability of the current market trend may arise!

Jingyang fully understands everyone's thoughts, as everyone's positions have noticeably increased during this period. Under the condition of heavy or even full positions, the mentality will definitely change; this is called "concern leads to confusion." In addition, no one can accurately judge how the short-term market will develop, and the fear of the unknown will also change everyone's thoughts.

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To be honest, today's overall market performance was below Jingyang's expectations. According to Jingyang's judgment in recent days, after the squeeze market ended, the entire market would transition from a rapid rise to a slow rise, or a fluctuating upward trend with ups and downs. A more optimistic scenario would be to stop the decline near the 5-day moving average and then step up along the 5-day moving average, similar to the market trend from the end of February to early March this year. If it's a bit weaker, the market index would break through the 5-day moving average and approach the 10-day moving average, with the 10-day moving average serving as the limit target position for this round of technical adjustment and not easily broken.

Looking at today's overall market performance, the 5-day moving average was not defended, so the limit target position for short-term adjustment is the 10-day moving average. Judging from the trend of the market index, next Monday's probe into the lower shadow line will almost reach the support position near the 10-day moving average, and then the technical adjustment of the entire market will temporarily come to an end in the middle of next week!

Why does Jingyang remain relatively optimistic when everyone's expectations for the future market trend are wavering, and even increased positions on Friday?

This is because the medium and short-term trends of the A-share market are not solely determined by technical patterns but are a comprehensive result of multiple factors including capital, news, policy, and technical aspects. Ordinary retail investors are very prone to losing their rationality when facing the previous sharp rise and the recent sharp decline, because everyone's attention is attracted by the technical trend, thus neglecting everything except the technical pattern!

In this article, Jingyang will help eliminate the panic about the sharp decline and provide a clearer understanding of the current market trend:

Panic Emotion 1: After the continuous squeeze and sharp rise before the holiday, the number of companies reducing holdings in the market has surged, and there have even been清仓-style reductions. Does this mean that the market trend has come to an end?

It cannot be denied that one of the significant reasons for the weak performance of the entire A-share market in the past few years is related to the large-scale cashing out and exit of listed companies, as the original intention of most companies going public is to cash out. Industrial capital is the one who best understands the investment value of a company, so when major shareholders significantly reduce their holdings, it often indicates that the stock price may be too high. When more and more companies choose to reduce their holdings in a concentrated manner, everyone will naturally waver about the entire market trend!

According to Jingyang's observation, since the market index began to rebound, the number of companies reducing holdings has indeed increased significantly, with at least 300 companies announcing reduction plans in just 10 trading days. It is clear that the continuous surge in the entire market has made many industrial capitals eager to cash in their profits. However, Jingyang also noticed that after a few days of sharp declines, the number of companies announcing reductions in the last two trading days has significantly decreased, and yesterday 50 companies announced plans to increase holdings and repurchase.That is to say, the current divisions within industrial capital are also significant, and it's not a one-sided rush to sell. After the market index declines, there are still many industrial capitals that are looking to add positions to bottom-fish. This can be seen from the ratio of increases to decreases in holdings; over 10 days, 300 companies reduced their holdings, while in just one day, 50 companies increased their holdings.

Another point worth noting is that today, the Beijing Stock Exchange has issued a statement declaring a crackdown on illegal share disposals. This indicates that the regulatory authorities will not ignore such violations, and as long as the market is not in a state of rampant growth, they will not allow listed companies to act recklessly!

Panic sentiment two: The expectation of a Fed rate cut in November has decreased, will this affect the rhythm of our central bank's macroeconomic adjustments and, in turn, the strength of economic recovery in the fourth quarter?

Last night, the U.S. Department of Labor released the CPI data for September. The latest data shows that the U.S. Consumer Price Index (CPI) rose by 0.2% month-on-month and 2.4% year-on-year in September, both 0.1 percentage points higher than market expectations, which originally thought the year-on-year increase could slow down from 2.5% to 2.3%.

Due to the better-than-expected non-farm data in the U.S. in September, the enthusiasm for the Fed to continue to significantly cut interest rates in November has already been reduced. Therefore, the September CPI data being higher than expected again will further reduce the intensity and willingness of the Fed to cut interest rates at the November meeting.

One of the triggers for the rebound in the A-share market this round was the sudden announcement of a reserve requirement ratio cut and interest rate cut by the central bank at the press conference held by the State Council Information Office on September 24th. The central bank's decision to loosen monetary policy in September was more or less related to the Fed's 50 basis point rate cut in September. Therefore, if the Fed's willingness and intensity to cut interest rates in November are reduced, the macroeconomic adjustment strategy that the central bank has just formulated may also be affected. This has also led to panic selling in the entire market again today.

In Jingyang's view, the actions of the Fed could potentially influence the decisions of our central bank. Although the higher-ups have not explicitly stated this, judging from the central bank's restrained actions over the past few months, this analysis is not entirely unreasonable. However, even so, it will not change the higher-ups' determination to stabilize the economy for the entire fourth quarter! Because even if monetary policy is affected, there are still many valuable policy tools in the higher-ups' toolbox!

And tomorrow morning at 10 o'clock, the State Council Information Office will hold another press conference, this time by the Minister of Finance, Lan Fo'an, to introduce the situation related to "increasing the counter-cyclical adjustment strength of fiscal policy and promoting high-quality economic development," and answer questions from journalists.

This press conference is also highly anticipated by the industry. This is because, up to now, monetary policy has already been put into effect, while fiscal policy has not yet been implemented. Therefore, the entire market is also very much looking forward to what economic stabilization measures the Ministry of Finance will introduce tomorrow morning. According to Jingyang's understanding, many analysts currently believe that the scale of incremental fiscal policy within the year may not be less than 2 trillion, including forms such as increasing the deficit ratio, issuing special government bonds and ultra-long-term special government bonds, and expanding the scope of special bond usage.

This means that even if the subsequent loose monetary policy slows down, the proactive fiscal policy can also contribute to the economic recovery in the fourth quarter!After carefully examining the recent bearish news in the entire market, only these two events have the potential to impact the market. However, as can be seen from the analysis above, these two bearish factors are merely pseudo-bearish and will not continue to influence the overall market trend.

Apart from these two bearish factors that could potentially create panic sentiment, there are no signs of weakening in the market's liquidity or fundamentals that Jingyang has temporarily noticed.

Looking at the liquidity aspect, even if the market entry sentiment of external funds has been affected in recent days, it is still better than the previous period when the daily trading volume was 500 billion. At the very least, the ETFs that have already been subscribed are just entering the market and have not yet completed their layout. Moreover, the central bank has just implemented a swap facility yesterday, providing institutional investors with 500 billion in ammunition specifically for investing in the stock market. These funds are still waiting outside the market and have not yet entered.

After excluding all uncertain factors, it should be clear that the sharp decline in recent days is simply a technical adjustment, aimed at repairing the previous rapid rise. The biggest difference between a technical adjustment and a trend change is that a technical adjustment is only a short-term adjustment and will not change the direction of the market's operation!