At the end of every bear market, it seems that there is an accelerated decline.
In 2005, the 998, in the three months before the bottom was confirmed, the decline was 9.55%, 1.87%, and 8.49% respectively.
In 2008, the 1664, in the month before the bottom was confirmed, the decline was 24.63%.
In 2013, the 1849, in the month when the bottom appeared, the decline was 13.97%.
In 2016, the 2638, in the month when the bottom appeared, the decline was 22.65%, the circuit breaker bottom is second only to 2008.
In 2018, the 2440, in the three months before the bottom appeared, the cumulative decline was 13.5%.
At the beginning of 2024, the Shanghai Composite Index opened at 2972, and the maximum decline is currently 10.3%.
The rapid decline at the end of the bear market has become a foregone conclusion, many people have accepted the reality, but they have not understood why.
The result is that people are looking for reasons everywhere, then looking for "scapegoats" everywhere, and asking who is short selling and who is making money.
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In fact, since this situation is inevitable, there must be deep-seated reasons.Reason one, the pull of space.
If everything is to happen at the end of the bear market, then the market's first consideration should be a rebound, not a bull market.
The end of the bear market is caused by the long-term accumulation of pessimism, which requires the repair of emotions and confidence.
Some people say that before the repair, there must be an extreme sell-off to eliminate those who are easily shaken.
The principle seems to be very correct, but in terms of the capital market itself, it is only a very small reason.
The acceleration of the decline at the end of the bear market is most important to create a space for the market to rebound.
In terms of capital, the first consideration when entering the market is safety.
What is safety?
A sufficiently low valuation, as well as a sufficiently large rebound space, can allow them to make a market.
Some people ask, can it rebound at 3,000 points?This round of market movement began to decline from 3418. If 3000 points is the so-called valuation axis, there is absolutely no room for growth, with only 400 points, or even 300 points, upwards, which is the dense transaction area.
Thus, at least a 10% space below 3000 points has become the strategy that many funds have formulated before entering the market.
Of course, the Shanghai Composite Index is still relatively lenient, because this index cannot fall too ugly. Other indices are even more frantic, such as the ChiNext.
The ChiNext began to decline from the high point in January 2023, with the highest being 2661. For funds, without a drop of 1000 points, or a 40% discount, it is definitely not attractive.
The previous high point of ChiNext was 3576, and it was mentioned early on that it needs to be halved to have a real rebound.
However, the 1788 point did not stop and fell another 200 points.
Space is a safety factor for the funds that make the market, and accelerating the decline is just to quickly expand the space at the end of the bear market.
Because at the end of the bear market, the cost of opening up space is very low, and the funds that dare to bottom-fish will become fewer and fewer.
The main force only needs to lightly smash, cooperate with some bearish news, and some passive liquidation plates to emerge, which can easily open up space.
When the space is available, the foundation of the market is also available.Reason Two, the Bloodbath of the Chips.
This second reason is the nature of capital, whose hands the chips are in.
It is essential to think clearly about one issue, which is the exchange of chips, this is very important.
There is no absolute bull or bear in this market. In a bear market, the goal of the bears is actually the chips in the hands of the bulls.
Because without chips, what kind of market can be made?
This is not just a question of where the upward space is, but how much money can be made in a round of the market.
The market must kill out the blood-stained chips to have results.
And the blood-stained chips are not as simple as buying at a low position.
I believe everyone has seen "Fan Hua", the chips in the hands of the treasure general, are blood-stained chips.
Those chips that want to be long but have to be closed out, are actually blood-stained chips.There is a saying that goes, "As long as the bulls are not dead, the bears will not stop."
Let's take private equity funds as an example.
Most private equity funds have a liquidation line at 0.8, which means they are forced to liquidate if they suffer a loss of 20%.
Most private equity funds were issued at 3200-3300 points in 2023.
If the index falls by about 20%, these private equity funds will face the risk of liquidation.
Looking at the broad market index, it would be around 2700, but if you look at other broad-based indices, it might be around 2800 that they should liquidate.
Some private equity funds may negotiate with their clients whether to delay liquidation, which could also lead to a delay in liquidation.
Then, if the bears push down another 10% to 0.7, basically, the private equity funds will not be able to withstand it and will be forced to liquidate.
If there is still room for negotiation for private equity funds, then the snowball, as well as some bullish financial derivatives such as call options, will have no choice but to start knocking in.
Next is the two-way financing, those who were fully invested in big white horses in 2022, under such extreme pressure, should have all blown up their positions.The market that forces liquidation is the real target of the bears, and it is also the key to their transition from short to long positions. As for the few pennies in the hands of retail investors, it would be best if you could cut your losses, but the vast majority will eventually lie flat. It's not as easy as imagined to get you to take out your money and share it with them. Therefore, at the end of a bear market, the key is to hit a certain level that can cause these people to go bankrupt and spit out their chips. In fact, what is eliminated in a bear market is not the retail investors, but a group of middle-class people.
The essence of bull and bear markets is actually a cycle. It's just that some are small cycles, and this time it may be a large cycle again. If you are still asking how to distinguish between big and small, you need to think more and understand more. The so-called size, in the end, depends on who holds the chips.The article translates to:
That is to say, this round of decline, whether it has completely wiped out the bulls, and whether the chips have returned to the hands of the big bears.
If they are all in their hands, then they are the super big bulls of the next cycle.
Capital will be responsible for its own chips, rather than any long or short, their goal, only to make money.
Perhaps the rise of the bull market is not at the end, but you will find that the rise in the middle and late stages of the bull market is also very much.
The sudden acceleration of the rise is actually just a preparation for capital to pull up and cash out.
The way of capital is actually similar, but not exactly the same.
Just like, this time's six consecutive monthly lines of Yin, is the first time in history, more tragic than ever.
But if you look at the trend, look at the essence, it is actually just that, the things done are exactly the same.
The bull and bear of this market, the essence is the greed and fear of human nature.
Accelerating the decline is nothing more than amplifying fear to achieve a profit exchange.
(Note: The translation may not be perfect as the original text contains some ambiguous phrases and concepts that may not have a direct equivalent in English.)Capital is not complicated; the bustling crowd all comes for profit.
Changing the pattern is just to cover up the true intentions, performing a new act for everyone to see.
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