Following a rapid rebound, the A-share market has begun to show divergent trends. The Shanghai Composite Index has extended its rebound pattern, pushing further toward the 4000-point mark, while the Shenzhen Component Index has displayed a pattern of rallying then retreating.
On August 18, the Shanghai Composite Index opened with a slight rebound before pulling back, precisely finding support at the 5-day moving average during the morning session and then rebounding again. The intraday high reached 3994 points, a mere step away from the key 4000-point psychological threshold. Meanwhile, the Shenzhen Component Index faced notable selling pressure, quickly retreating during the session before recovering at the 5-day moving average, yet ultimately failing to close in positive territory.
By the close, the Shanghai Composite Index settled at 3990.3 points, up 0.19%, while the Shenzhen Component Index finished at 14622.5 points, down 0.56%. The ChiNext Index closed at 3705.56 points, a decline of 0.93%. Trading volume continued to expand compared with the previous session, though the rate of increase narrowed noticeably. Total turnover across the Shanghai, Shenzhen, and Beijing markets reached 2.42 trillion yuan, a modest rise of nearly 20 billion yuan from the prior day.
At the sector level, agriculture, forestry, animal husbandry, and fishery, petroleum, coal, and banking led the gains. On the downside, components, cloud services, film and television exhibition, and securities were among the weakest performers. Beneath the divergence in the two major indices, individual stock dispersion also widened considerably. More than 2,100 stocks across the entire A-share market advanced, with 81 hitting the daily limit-up, though the number of limit-ups declined. Declining stocks, however, approached 3,300.
Where the market stands now
From a broader market perspective, the Shanghai Composite Index has held above the annual moving average and continues its rebound trajectory, suggesting a short-term push toward the 4000-point level is likely. Securities analyst Wang Xiaoli noted that while market volatility has intensified, the intraday pullbacks have consistently been confirmed as retests of the short-term moving averages below, while the afternoon recoveries have preserved the technical momentum for further advances. In the near term, the index is set to challenge the 4000-point mark. However, as a significant psychological resistance level, the battle for 4000 will not be smooth sailing, and volatility is likely to remain the dominant theme.
After the sustained rebound of recent sessions, upside resistance has begun to emerge. On one hand, while the index's center of gravity has shifted higher, the frequency of intraday pullbacks has increased, with some funds showing a strong willingness to lock in profits at higher levels, a characteristic of volume expansion without corresponding price gains. On the other hand, sector rotation has been excessively rapid, lacking a sustained mainline theme, with capital favoring defensive positions in low-valuation sectors rather than offensive plays, reflecting a marginal decline in market risk appetite. In particular, as the index approaches the key psychological level, the lack of concerted strength among bulls makes an index-level breakout more difficult, and the need for short-term consolidation is growing.
Senior investment consultant Chen Yuheng observed that the market is currently at a directional decision point within the rebound phase. Regarding the nature of the afternoon rally, the current price-volume coordination, sector rotation structure, and domestic and external macro environment are not yet sufficient to support a trend-breaking advance. From an operational standpoint, with no clear market mainline and unclear index direction, a wait-and-see approach is more appropriate, awaiting right-side entry opportunities once volume expands effectively, mainstream hotspots become evident, and the index charts a definitive direction.
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