Resistance overhead is becoming increasingly evident, with the market pulling back sharply after three consecutive days of gains. On August 28, the Shanghai Composite Index opened lower and fluctuated, ultimately closing in negative territory as selling pressure intensified into the close. The Shenzhen Component Index and ChiNext Index both rebounded to the vicinity of their 20-day moving averages in early trading before reversing into a downward trend, eventually closing near their lowest levels of the session.
The Shanghai Composite Index settled at 3952.18 points, down 0.11%; the Shenzhen Component Index closed at 13953.07 points, a decline of 0.68%; and the ChiNext Index ended at 3424.4 points, dropping 1.41%. Trading volumes contracted once again, with combined turnover across the Shanghai, Shenzhen, and Beijing exchanges reaching 2.12 trillion yuan, a reduction of more than 20 billion yuan from the prior session.
Sectors such as oil, chemicals, agriculture, forestry, animal husbandry, and fisheries, along with textiles and apparel, posted contrarian gains during the session. Conversely, medical services, semiconductors, communications equipment, and aerospace equipment led the list of decliners. Despite the collective pullback in the three major indices, individual stocks showed more advances than declines, with over 3,000 stocks across the broader market closing in positive territory and 83 hitting the daily limit up, while fewer than 2,400 stocks fell.
Following the sustained rebound, the market has weakened once again. According to Chen Yuheng, a senior investment consultant at Jufeng Investment Advisors, the collective retreat of tech stocks after Thursday's surge has significantly suppressed the upward potential of the indices. Short-term sentiment is diverging simultaneously, and the violent fluctuations in popular stocks have further increased the difficulty of short-term trading.
The core contradiction currently facing the market lies in the coexistence of "external warmth and internal dispersion" alongside a "breakdown in consensus." In overseas markets, only a few individual leaders in the US AI sector are strengthening, while most other names are declining, indicating that international capital's confidence in the AI supply chain is becoming more concentrated rather than broadly dispersed. Reflecting this on the A-share market, Thursday's apparent broad surge in tech stocks, accompanied by a simultaneous pullback in micro-cap stocks and the early weakening of certain computing power names, exposes the underlying reality that localised enthusiasm is masking overall weakness. Funds are shifting away from the previous model of blindly chasing hot themes and moving toward a cautious assessment of whether fundamentals can support a comprehensive rally. This shift in sentiment is directly reflected on the trading screens as rapid rotation among hot sectors and increased risks associated with chasing highs.
Regarding the market's persistent volatility, Chen noted that what the market currently requires is dual confirmation from both time and signals. This involves waiting on the one hand for clarity on overseas central bank policy expectations, and on the other hand for a convergence of large-cap and small-cap style trends within the A-share market itself. Only when internal and external factors form a resonance can incremental capital genuinely return and the foundation for a major upward wave be solidified. In the near term, the market remains in a complex phase of the "bottoming" process. While a new primary uptrend is worth anticipating, the tail end of a period of volatile consolidation is often accompanied by significant downside risks for individual stock prices.
How will the market unfold in the short term after failing to break through on the upside? In response, securities analyst Xiang Xinyuan stated that the pullback was within expectations given the sustained rebound combined with downward pressure from overhead moving averages, which has intensified selling pressure. In the near term, the focus next week will initially be on support from the lower moving averages. If the indices retrace to these levels and find effective support, the phased rebound that began on August 25 could potentially extend further.
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