After rebounding for four weeks, the Shanghai Composite Index may be preparing to take a dive.
On February 28th, the Shanghai Composite Index experienced an adjustment at the daily line level.
On 2.28, it reached a high of 3031 points, and on 2.29, it opened at a low of 2943 points, with the maximum drawdown being 88 points.
This was the first deep squat since the rebound in February, and it was clearly a washing of the market.
In mid-March, the Shanghai Composite Index will welcome its second squat, which will also be a deep washing of the market.
Of course, the time of the deep squat is not necessarily at the beginning of next week, because the index still has a small space for an increase.
The high point of these two days is 3063, and the theoretical starting point for the deep squat may be around 3080.
If this deep washing of the market occurs around Wednesday, the theoretical decline will be about 80-100 points.
The purpose of this washing of the market is to retrace the upward trend line, the 20-day line.
The 20-day line is the most standard upward trend channel line for corrective markets, and most corrective markets will develop along the trend line.During the rise, the retest of the 20-day line is the largest scale of the market's washing process.
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In this round of the rise, the deviation rate of the Shanghai Composite Index's 20-day line reached a maximum of 5.5%, and after the repair, it fell to within 3%.
In principle, there will be a washout with a deviation rate close to the 0-axis in the middle of the market.
This place is the last chance to get on the train, and it also means a sign of the continuation of the market.
Why does it appear next week, not the following week, or some other time?
First of all, it is not 100% that it will appear next week.
Because the market can also have another very disgusting way, just like the rebound from 2923, in the range of 3030-3089, it has been slightly shaken for nearly 15 trading days.
But this way is not conducive to the overall repair market.
The market is more likely to clean up the chips between the big opening and big closing.
A big fall will wash out panic, and the counter-attack of a big rise will make the market more confident in the market.Confidence is a fundamental condition for attracting retail investors to board at the end of a corrective market and truly trapping them.
There is another point, which is the time cycle. The adjustment of the main line sector is approaching.
Technology is the main line of this round of the market, and I can clearly tell everyone that there is no sign of a top.
However, not seeing the top does not mean there is no adjustment during the rise.
In the first four weeks of the market rebound, there was no adjustment in the main line of technology.
Some people may not be very good at seeing this, and the reference can be the strongest in the technology field, that is, the optical module, which is the communication index, four weeks in a row.
Under such circumstances, as the absolute main line, even if there is no significant decline, there will be a certain range of fluctuations.
And this kind of weekly level of fluctuation, reflected on the daily line, is what seems to be a deeper decline.
The so-called deep washing in the eyes of retail investors is actually just a weekly level of fluctuation.
The Shanghai Composite Index fell by 100 points, which is just a little more than 3%, and for an index that has risen by more than 400 points, it is not a big level of decline.Focus on a key point called the "bowl mouth" of the candlestick.
In our daily life, we use a bowl to serve rice.
In the A-share market, the "bowl mouth" is used to hold retail investors.
There are many forms of the bowl mouth, the most common of which is actually the double top.
Two high peaks with a rounded arc in the middle form a bowl shape.
However, the bowl shape can be either higher in front and lower in the back, or lower in front and higher in the back.
The market can either complete the entire process at once, then adjust at a high level and touch the second peak.
Or it can be divided into two parts, first seeing a peak, and then reaching a new high to see the second peak.
As long as the bowl mouth can ultimately take shape, and finally have funds trapped in this bowl, it's fine.So, from this perspective, the market trend can also be divided into two types: low probability and high probability.
High probability.
The market does not make any adjustments and goes straight up, breaking through 3089 and heading directly towards 3200.
From April 2022 to July 2022, it took about 10 weeks for the market to reach its peak directly.
From the beginning of 2019 to March 2019, it took about 13 weeks for the market to reach its peak directly.
At the end of December 2012, it was also a 10-week market trend, reaching its peak directly.
Going further back, from November 2003 to March 2004, it lasted about 14 weeks and also reached its peak directly.
This kind of corrective market trend, which does not adjust at the weekly level and relies on the 20-day line at the daily level, is the most common.
Forcing continuous increases to restore confidence.
This kind of high-position bowl mouth is often completed in just 2-3 weeks, which is a small bowl mouth at the daily level.Because confidence recovers quickly, a top in the market within 10-15 trading days is enough to trap most retail investors.
Low probability.
The market can also break through the 20-day line and make a deep adjustment.
For example, the repair market that started at the end of October 2022 had a deep adjustment in December, and then continued to rise.
Including the early 2016, after the circuit breaker repair market, it also went on for a long time, and the 20-day line was broken through in the middle, and there was a deep adjustment.
But this market has a common feature.
That is, the last fall, the time cycle is not long enough.
Unlike in 2023, the index was adjusted for 7 months, the Science and Technology Innovation Board for 10 months, and the ChiNext for 12 months before the repair market started.
Because the longer the fall, the more fierce the market confidence needs to be repaired, the more fierce the market rise.
So, after the first round of rising, the probability of making a super large-level adjustment, breaking through the 20-day line, and then getting up again is not high.The so-called deep washing of the plate, it's also not possible for the decline to be too great, or for the time to be too long.
In this kind of market, it is actually still a game of mentality in terms of capital.
This is just like the bottom rising directly and pulling up eight consecutive days to rush to 3000 points, which is a principle.
The so-called deep adjustment here is relative to the most recent adjustment strength, and does not represent that the adjustment amplitude is very deep for the whole round of the market.
From another perspective.
Technology needs to take a break here, just like Nvidia will not run all the way without taking a break, which is a principle.
On the way to take a break, the capital needs to rotate, and there will be obvious performances of coming in and out.
When the market's capital moves a lot, the shock will definitely be a game.
The adjustment of technology will definitely have an impact on market confidence, but there are so many subdivisions of technology, just find a subdivision track to fry, and the market's popularity can be preserved.
The repair market, to do rotation, grasp the rhythm, the difficulty is actually quite large.Hold onto a clear main thread, from the beginning to the end, and it will be relatively simpler in comparison.
Adjust along the way, dealing with it with the method of buying more when it falls sharply and buying less when it falls slightly.
When it's time to get on the bus, you must be bold, because many funds are waiting for the opportunity to get on.
And when you find that the market seems to be full of vitality, and there are opportunities to buy anything, that's when you should be careful.
Because this kind of illusion with strong confusion is often the beginning of the bowl-shaped market.
Retail investors are not necessarily trapped at the top of the mountain, but often in a small platform on the mountainside.
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