Market Interpretation: Low Repeated Shocks Seeking Resonance Opportunities

This week, the market reached a new low of 2844 points, with a sharp rebound. The highest point has reached 3016 points. It was repressed by the suppression of the 5 and 10 day moving average and the decline of the peripheral market.

On the other hand, the supply side reform benefited stocks, "along the way" and the concept of reform of the central enterprises have some performance, and have some positive impact on the stability index.

But the volume continued to shrink and uncertain factors and other reasons caused the market to oscillate repeatedly in the low position.

The market is concerned about whether the market will create a new low again. If it does not create a new low, stabilizing the market is a good trend. Whether or not it will rebound requires a variety of factors.

External factors: global stock market decline, crude oil and commodity prices continue to decline and so on, causing capital market to encounter cold winter.

January 26th

Interest rate meetings, such as anticipation of continued interest rate increase, exchange rate instability and cross-border capital outflow, have made investors cautious.

According to the foreign exchange administration data, cross-border capital flows showed a net outflow in 2015. From the data of bank settlement and sale, the first quarter deficit was 91 billion 400 million US dollars, the two quarter deficit was US $13 billion 900 million, the deficit in the three quarter was US $196 billion 100 million, and the fourth quarter deficit was 164 billion 400 million US dollars.

This is related to the US interest rate increase, capital hedging and the optimization of foreign currency debt structure. The central bank also stabilizes the exchange rate through foreign exchange intervention.

After that, we should continue to pay attention to the direction of cross-border capital flows, exchange rate fluctuations and the stability of the peripheral stock market.

Internal factors: the downward pressure on the economy is bigger. The measures of "three go, one drop and one subsidy" will continue. The supply side reform will take time, and innovation will take time.

Therefore, the introduction of the "13th Five-Year plan" and the deepening of the reform of state-owned enterprises are all worth looking forward to.

Because of the joint role of internal and external causes, it is a good trend for the market to stabilize in the short term.

Through the joint use of reverse repurchase operations, treasury cash deposit, MLF and SLO, the central bank put 1 trillion and 600 billion capital into the market, liquidity fluctuated or eased, but from the intertemporal interest rates in Shanghai, the short and medium term interest rates continued upward, indicating that the liquidity tensions have not been completely eliminated. It is expected that the central bank will still conduct reverse management in the open market for liquidity management.

From a technical point of view, the MACD green column shortens, showing that the upper part of the pressure drop, but did not form a golden fork, mainly due to the lack of quantitative support.

On the K K line, a small line with a shadow line was received, which indicates that the pressure on the top is still heavier.

The market is in the process of repeatedly exploring the bottom and maintaining a short and weak balance.

Breaking the balance requires external force, stabilizing the external market, stabilizing the exchange rate and actively guiding the policy, which will help the market rebound. It is more appropriate to observe caution before it is stable.

On the news side, this week the central bank lowered its MLF interest rate for 3 months to 75 basis points to 2.75%, and invested 955 billion yuan into the market through SLO, MLF and reverse repurchase.

In January 18th, 55 billion yuan, 3 days SLO1 months 19 days, the central bank carried out 4 operations: 80 billion yuan 7 days reverse repurchase, 75 billion yuan 28 days reverse repurchase, 328 billion yuan 3 month MLF, 82 billion yuan 82 billion year MLF1 month date, and launched RMB yuan SLO1 days, a total of RMB yuan reverse repurchase, including the Yuan Yuan period reverse repurchase, Yuan Yuan days reverse buy back.

The central bank's move is no doubt a huge liquidity to the market, which also makes A shares benefit greatly.

We know that the core factor that determines short-term stock price rises is the supply of market funds.

On Friday, Shanghai stock index closed up near 2900 points, and the weaker trend in early trading did not take up the offensive until afternoon, and returned to 2900.

From the track of the K-line operation, the Shanghai stock index is doing the action of building the bottom of the interval by 2800-3000 points. Of course, it is still necessary to confirm further.

At present, many major shareholders of the company postponed the lifting of the ban even actively increased their holdings, and played a positive role in stabilizing the market sentiment.

At present, the valuation level of Shanghai stock index has been more reasonable, and the investment value of many value stocks has already been highlighted, and the possibility of continued deep down is very small.

Of course, bottoming is a process that can not be accomplished overnight, keeping rational and calm. It is advisable to absorb high-quality stocks and underestimate stocks.

Of course, we should also pay attention to the avoidance of stocks that are worth more than 100 times in the growth enterprise market and small and medium-sized boards. The earlier they are away, the wiser they are.

First of all, favorable policy expectations will help A shares get out of the downturn.

In the face of extreme volatility at the beginning of the year, management has been able to take care of the A share market, promptly "admit mistakes", suspend the fusing mechanism, formulate new rules for reducing the size of non tradable shares, relieve the pressure of reduction, clarify the schedule of registration system and IPO, and emphasize that the registration system will not enlarge the scale of new shares, and so on. The policies and measures fully reflect the management's intention of protecting A shares.

Taking into account the early March will usher in the two sessions, and the 13th Five-Year planning of each subdivision will be expected to usher in a substantial positive landing period, policy expectations are expected to help A shares out of the decline.

Second, investors' mentality is relatively stable.

According to the relevant data, from January 11, 2016 to January 15th, the number of new A share investors increased by 332 thousand and 100, the annulus ratio increased by 10.55%, the trading investors 19 million 433 thousand and 500, the annulus ratio decreased by 10.47%, the positions investors 51 million 340 thousand and 200, and the annulus ratio increased by 0.16%.

It can be seen that although the performance of the A share market in 2016 was very extreme, and the cautious mood of investors has not been completely reversed, the holistic mentality of investors remains relatively stable, which will help A shares regain confidence and motivation in the upside.

Finally, technical indicators are restored in place.

After experiencing repeated extreme shocks in recent weeks, the four major indexes have obviously overturned, and have been callback to the bottom of the previous stage. Taking into account the index, daily, weekly, monthly and other multi cycle technical indicators have been repaired in place, this will help to form a technical rebound in the market.

Looking at the future market: considering the factors such as "favorable policy expectations + relatively stable investor mentality and technical repair in place" and other factors, we expect that the worst period of A shares will be over and the best opportunities are expected to come.

It is suggested that investors should grasp the opportunity of low interest when taking stock of future bull market expectations.