This week, under the influence of the pre-holiday effect, the A-share market continued to see shrinking volume, with major broad-based indices all posting weekly declines. Thursday's correction in particular filled the market with anxiety. During the Mid-Autumn Festival holiday, multiple news items emerged — what impact will these have on the market? Where will future opportunities lie? Today, Brother Da and Dr. Niu discuss topics of common concern.

Dr. Niu: Hello, Brother Da. It's time for our weekend market chat again. Several market-moving news items came out during the Mid-Autumn Festival holiday, including China and the US reaching an eight-point consensus and Iran stating it no longer trusts dialogue with the US. Next week, there are also important events such as US non-farm payroll data. How do you view next week's market?

Dao Da: The news over the weekend was overall neutral, including the China-US eight-point consensus and the US-Iran situation. Currently, there are roughly two important factors affecting the market: first, US Treasury yields, and second, the pre-holiday effect. As of Friday's US market close, the 10-year, 20-year, and 30-year US Treasury yields were 5.1646%, 5.5494%, and 5.4905% respectively, with the 30-year yield hitting a new phase high. Elevated US Treasury yields will pressure tech growth stock valuations and reduce market risk appetite. Next week brings the National Day holiday, and historically, pre-holiday market conditions tend to be relatively quiet. At the same time, next week also features the important US non-farm payroll data event. I believe the market will still see a strong pre-holiday effect next week, meaning quiet trading and a wait-and-see sentiment are likely to prevail.

On the broader market, I mentioned in Wednesday's article that the Shanghai Composite Index had momentum to pull back to the 3905–3920 point range. Although I anticipated the correction, the depth exceeded expectations, with Thursday closing at 3888.37 points on a bare-bottom bearish candle. Currently, the Shanghai Composite Index has already broken below the 61.8% Fibonacci retracement level of the September 16–22 swing, with the next level being the 80.9% retracement near 3872 points. From the 30-minute K-line perspective, the Shanghai Composite Index left a gap on September 18, and if the correction continues, there will be momentum to fill that gap. Overall, under the pre-holiday effect, the market will continue to fluctuate next week, and we should be prepared for a retest of the 3872–3880 point range. Since the current index is not far from the above range, next week can be viewed as weak consolidation, with a larger-scale turning point likely coming after the National Day holiday.

During the Shanghai Composite Index's rebound from September 16–22, the STAR 50 Index, CSI 500 Index, CSI 1000 Index, and CNI 2000 Index led the rebound, all bottoming out on September 11. Therefore, if the market is to improve, we can watch whether the STAR 50 Index, CSI 500 Index, CSI 1000 Index, and CNI 2000 Index can give improvement signals, and whether the micro-cap stock direction can continue to lead profit-making effects.

Dr. Niu: Thank you for sharing, Brother Da. The market is quiet, and the pre-holiday effect is indeed very obvious. Many people around me have already started their vacations, but there will still be 3 trading days next week. How do you view the upcoming opportunities?

Dao Da: As I just mentioned, next week's market can be viewed as weak consolidation. Under the pre-holiday effect, I think the market will mainly be "going through the motions." In terms of opportunities, they remain in new technologies, areas with expectations, logic, catalysts, and cross-industry themes. However, in AI hardware, because the chips are starting to age and the stories are starting to age, plus large-cap stocks represented by "Yi Zhong Tian" are doing nothing, individual stocks with expectations, logic, and catalysts may not perform particularly well in the near term. Therefore, the focus going forward remains on new technologies, cross-industry themes, and M&A restructuring.

From this week's performance, the market has been fermenting Micro TEC and Vector Network Analyzer (VNA) themes. Combined with the catalysis of MLCC, NPO, and other sub-sectors since August, after a period of gains, stock prices will also face phases of weakening or range-bound consolidation. Therefore, even for Micro TEC and VNA, it is not suitable to blindly chase rallies. However, Micro TEC, VNA, and diamond heat dissipation are still worth watching.

In other areas of AI hardware, due to supply shortages, prices of several components in the VR200 bill of materials have risen significantly or have price increase expectations, including memory, ABF substrates, MLCC, and PCB. Japan's three major photoresist companies are adjusting prices globally starting in October. In this regard, we can watch whether the photoresist sector shows any unusual movement and monitor the sustainability of gains.

Regarding sectors that affect market direction, focus on whether the securities sector can give clearer signals. After the National Day holiday, listed companies will gradually disclose their third-quarter earnings, at which point we should focus on companies with better-than-expected performance.

Finally, Brother Da offers a summary: The National Day holiday is approaching, and pre-holiday market conditions tend to be relatively flat. A larger-scale market turning point will likely have to wait until after the holiday. Under the pre-holiday effect, watch more and act less. In terms of sectors, continue to focus on new technology sub-sectors in the AI direction.

PS: To learn more about Brother Da's views or to communicate with Brother Da, please follow the WeChat public account "Dao Da Hao." (Zhang Dao Da) According to the latest regulations of relevant national authorities, this journal does not involve any operational advice, and market entry risks are borne by the individual. Cover image source: National Business Daily Media Library.