Currently, the market is in a phase of choppy consolidation following an oversold condition. From an index perspective, lows have been gradually lifted, and policy-floor support likely limits downside risk; however, from the standpoint of current trading volume and chip distribution, conditions for a trending upward move are not yet in place.
We believe the current rebound is more of a repair than a reversal, mainly because a trend reversal requires not only policy support but also a recovery in risk appetite and sufficient digestion of the prior chip structure. Volume and the nature of capital will determine how far this repair can go. The surge in volume was concentrated on two rebound days, with advancing stocks dominating throughout and limit-down stocks almost disappearing, indicating that incremental capital is indeed willing to absorb at low levels.
At present, the main absorbers are essentially passive, instrument-type funds. Equity ETFs have maintained net inflows for multiple consecutive weeks, with single-day scale once hitting a new high for the year, and margin balances have rebounded in tandem, while the willingness of active funds to chase highs has yet to be verified. This distinction is critical: the role of instrument-type funds is to provide support, and their buying rules are determined by share subscription/redemption and index compilation, giving them weak marginal pricing power over prices and no judgment on earnings; only when active funds continue to enter can valuation repair potentially be pushed into a trend re-rating.
Therefore, next week may enter a verification period, but the verification points need to be reset: first, whether volume can be maintained in the high-volume range; second, whether the AI hardware chain can stabilize after overseas sell-offs; third, whether policy tools can be converted into real incremental flows. Current external uncertainties have somewhat diminished, but this is bearish for AI, and liquidity risks have not been fully released.
The U.S. midterm election results have led the market to expect constrained fiscal expansion and a lower probability of overseas military action, rapidly clearing geopolitical premiums. Falling oil prices have pushed down inflation expectations, which in turn drove long-end U.S. Treasury yields and the dollar lower, benefiting gold and non-ferrous metals sectors. The Democratic sweep of both chambers also means rising resistance to AI regulation, antitrust, and data center energy consumption reviews, with land approval and construction cycles being lengthened and capex space facing downward revisions; combined with market doubts about the match between tech giants' computing investment and returns, this ultimately evolved into concentrated selling of overseas tech stocks that transmitted to the A-share hardware chain.
Monetary policy has also not turned accommodative. At the last Federal Reserve meeting, rates were held steady but a dissenting vote favoring a hike emerged, and the economic assessment was upgraded, constituting a typical "hawkish" pause. A year-end rate hike may still be the baseline scenario.
Looking ahead, in the short term, the index will most likely consolidate through choppy trading. Direction-wise, within growth sectors, order flow, cash flow, and earnings delivery will serve as the dividing line. Directions with delivery capability and a healthy chip structure may still have room for repair after pullbacks, but whether the rebound can continue depends on the two conditions of volume and the AI chain stabilizing; in addition, dividend sectors may still possess "defensive" value. In the medium term through year-end, the policy floor provides downside support, while the earnings floor and overseas valuation anchors limit upside space. The index is more likely to trade in a range with a slowly rising center of gravity, rather than embarking on a one-sided trend.
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