To The Moon

The Shanghai Composite Index rose 0.59% to close, while the Shenzhen Component Index gained 0.69%, the ChiNext Index advanced 0.51%, and the Beijing Stock Exchange 50 Index edged up 0.45%. Combined turnover across the three major markets reached 1.82 trillion yuan, down 22.4 billion yuan from the previous session, marking the second consecutive day that transaction volume has fallen below the 2 trillion yuan threshold. More than 2,900 stocks across the entire market closed higher.

Sector-wise, gold concept stocks, securities firms, and paper manufacturing led the gains, while medical services and electric motor sectors declined. In the gold complex, Shenzhen China Bicycle Company (Holdings) Co., Ltd. surged to a fifth consecutive limit-up, with DIA shares, Jin Chengxin, nonferrous silver plays, Jinyi Culture, and Jiangxi Copper all hitting daily highs. Western Mining, Luoyang Molybdenum, Northern Copper, Gaoneng Environment, and Yunnan Copper followed with gains. The securities sector showed notable strength, with Jinlong Co. and Xiangcai Securities hitting limit-up, while HATOU, Changjiang Securities, China Merchants Securities, Guoyuan Securities, and Western Securities advanced. Paper stocks strengthened in early trading, with Qingshan Paper recording two consecutive limit-ups, followed by Minshida, Hengda New Materials, Bohui Paper, Rongsheng Environmental Protection, and Jingxing Paper. Medical services opened higher but faded, with Chengye Pharmaceutical falling over 5%, dragging down Kanglong Chemical, InnoScience, Boji Medical, and Bide Pharma. Electric motor stocks weakened, with Huarui Precision dropping over 15%, followed by Jiangte Motor, Dibei Electric, Zhaowei Electromechanical, Chenguang Motor, and Yifan Transmission.

At the index level, despite two consecutive days of rebound, the continuous shrinkage in trading volume indicates the recovery lacks substance, and overall caution remains warranted. Over the past two sessions, the market has closed higher, but the more concerning signal is the steadily declining volume, suggesting this rebound is of poor quality. During the upward move, outside capital has not entered the market meaningfully; rather, it is largely short-covering by bulls in a thin-liquidity environment that has pushed indices higher. In most cases, markets do not decline in a straight line but rather follow a "fight while retreating" distribution pattern. Since large institutional funds often need rebounds to reposition or offload holdings, such rallies may actually present windows to reduce exposure.

The unusual strength in the securities sector today suggests some large funds are attempting to steer sentiment toward recovery, but the volume response indicates limited market participation. Two consecutive days of non-broad-based gains are insufficient to overturn the prevailing cautious consensus. Overall, this is not an opportune moment for aggressive buying. Major indices are approaching the neckline of a head-and-shoulders top pattern, and the risk of breaking below this level has not been eliminated. The bigger issue facing the market is the absence of a mainstream narrative capable of uniting consensus—a highly uncertain factor that is difficult to predict in advance. Should the market later establish a clear leadership theme, with turnover expanding back above 2 trillion or even 2.5 trillion yuan, and major indices stabilizing near or above the neckline, a more reliable bullish signal would emerge. Until then, the prudent approach is to gradually reduce positions and prioritize risk control.

At the sector level, emphasis should be placed on the "dividend + micro/small-cap" barbell strategy, which has demonstrated significant excess returns and outperformed during the market's defensive phases. On a monthly basis, the Wind Micro-Cap Index has led with a 13.11% gain; beyond micro and small caps, the dividend style has also performed admirably. Looking back before the "924 rally" commenced, the prevailing allocation strategy was precisely this barbell structure—using high-dividend assets as defensive ballast while leveraging the high beta of micro and small caps for offensive returns. Notably, the market at that time was also characterized by a proliferation of speculative "monster stocks." Today, Shenzhen China Bicycle Company (Holdings) Co., Ltd. has delivered five consecutive limit-ups, establishing itself as one of the most recognized speculative names in the current market, once again validating the adage that "shrinking volume breeds monster stocks." This suggests the market may be entering a phase of relatively active theme speculation.

At present, although the bull market structure has not been definitively broken, the persistent contraction in trading volume, subdued sentiment, and weakening of major broad-based indices all point toward defensive strategies potentially generating more pronounced excess returns in the near term. Additionally, with gold prices continuing to strengthen and industrial metals like copper rising in tandem, related industrial metal sectors are showing signs of catch-up gains. [Note: Market risk exists; invest with caution. Under no circumstances should information or opinions expressed herein be construed as investment advice. Unless otherwise noted, research data is supported by Tonghuashun iFinD.]