Bear Market Rally Will Continue To Look At The Decline Of A Shares?

Double down will continue the bear market rebound: since November last year, the central bank has "relaxed" six times. Every time the liquidity supplement seems to be for different reasons, but the impact on the stock market is different. The move in May was triggered by the two financial investigation, which triggered a sharp drop in overseas Chinese stock market on Friday, while the double dip in June came from the collapse of the Chinese bubble. In August, it fell again to cope with the global fluctuations triggered by the sudden devaluation of the renminbi. This time, the Central Bank of China pointed out that deflationary pressure is one of the reasons for its double decline, rather than growth. This is not the same as usual.

Although growth has slowed down, it has not collapsed, so even if the market consensus is advocating, it can not serve as a sufficient reason for comprehensive quantitative easing. Admittedly, we can implement comprehensive measures regardless of the consequences. But economic growth will continue to slow down, and the focus of the economy will continue to shift to slower growth in the service sector. Therefore, the new liquidity is unlikely to be realized through earnings growth, but only through the expansion of the valuation multiplier. However, because the market is already very high, it is unlikely to move further from its current level unless we can see two bubbles in the same asset class within six months.

When the market runs to a strong resistance point at 3400, we observe that the leading indicators and high frequency economic data continue to point to a further slowdown in economic growth. On the contrary, pessimistic. Market sentiment It is a reverse leading indicator of short-term positive returns. That is to say, although pessimism is the reason for rising trend, the fundamentals of the economy are rather empty. Such a serious departure from the two important indicators imply that the market is at a critical time for a short-term decision: the bear market rally in the market is either sustained by pessimism or counter focusing on fundamentals.

In this year's market, our market sentiment model has shown extreme optimism in the offshore Chinese market in May 22nd, and this kind of fanaticism is just before the Hongkong market is about to collapse, before the A share bubble is about to burst. After that, our market sentiment model in September 4th showed that the offshore China market was extremely pessimistic, and the market rebound was imminent.

This model supports our view of bear market rebound in major media interviews since the end of September. In a recent Bloomberg interview, we expressed a "mirage" which is likely to be "more ferocious, or bring a new bull market to many people". The fundamentals have long been deviated from the performance of the stock market since the middle of 2014, and little is the trigger factor for short-term spanactions.

This spanaction risk One is the weakening of the RMB exchange rate after the double fall, while the Central Bank of China tried to defend the strong RMB exchange rate and consume domestic liquidity at the time of its attempt to enter the SDR. But this scenario should be a small probability event. The renminbi bears must have learned from the recent weeks of trading, especially after a few weeks ago by the central bank's euphemistic operation in the offshore renminbi market. The Central Bank of China is a strong opponent, especially for the other side of the renminbi short trade.

But this Technical repair It is still a bear market rally: we define the bear market rally as a declining rally at a high point. Beyond the short-term trading cycle, our main reservations for the current Chinese market are - valuation is still too expensive - even after a sharp drop of nearly 50%. The median price earnings ratio is 43 times, 66 times the Shenzhen stock market and 100 times of the growth enterprise market. Although many policy tools are still available at the time of need, the problem now is that we have too much money and too little investment.