Respect the Market Even in a Bull Market

October 8th marked the first trading day of the stock market following the National Day holiday. On this day, the Shanghai Composite Index (SCI) exhibited a pattern of opening high and closing low. In the morning session, amidst the anticipation of all market participants, the SCI predictably continued its gap-up opening. Due to the high expectations placed on it, the index opened at 3674.40 points, up by 337.90 points, with a staggering increase of 10.13%.

However, the stock index then experienced a downward trend, with the opening index becoming the highest for the entire day. The SCI dropped to its lowest point at 3372.19 points during the session, falling by 302.21 points from the opening price, representing a decline of 8.22% from the opening level. Consequently, although the SCI maintained an upward trajectory throughout the day, the intraday volatility was significant, with individual stocks experiencing substantial fluctuations in price, leading to mixed fortunes for investors.

The performance of A-shares on October 8th undoubtedly provided investors with a vivid lesson in risk education. It serves as a reminder that even in a bull market, one must maintain a sense of reverence. The bull market should not lead to the disregard of market risks or to indiscriminate stock purchases. The lessons learned from the A-share market's performance on October 8th are quite profound in this regard.

On the morning of October 8th, the SCI opened with a significant gap-up of 337.90 points, with an increase of 10.13%, which could be described as frenzied. This was akin to the entire SCI "hitting the upper limit" of its price movement. This extreme opening was partly due to the continuous rise in the market before the National Day holiday, with the market increasing by over 600 points in five trading days leading up to the holiday. Notably, on the last trading day before the holiday, the SCI rose by 248.97 points, with an increase of 8.06%.

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On the other hand, during the National Day holiday, various positive news spread, and some market participants offered extreme interpretations of the post-holiday A-share market trend. For instance, a widely influential viewpoint in the market was that A-shares would open and close at the upper limit, meaning that they would start the day at the upper limit and maintain it until the end of the trading session. It was this contagious optimism that led to A-shares indeed opening on October 8th at the "upper limit." However, this upper limit did not last; instead, a significant sell-off occurred after the opening, with many stocks falling from their upper limit or near-upper limit prices to negative territory.

Take the A-share king, Kweichow Moutai, as an example. It opened at 1910 yuan per share, with a gap-up of 162 yuan per share, representing an opening increase of 9.27%. However, after opening, the stock price of Kweichow Moutai plummeted to 1680.18 yuan, a decrease of 229.82 yuan from the opening price, with a drop of 12.03% from the opening level, exceeding the drop of a single trading halt. Therefore, if an investor had bought Kweichow Moutai shares at the opening, they would not only fail to make a profit but would also incur a significant loss. Based on the closing price of Kweichow Moutai on October 8th at 1723 yuan, the loss for the day would be nearly 10%.

Conversely, if investors did not chase high prices but instead bought low, they would not have suffered the aforementioned investment losses. For example, if an investor bought the stock around 1700 yuan during its price correction, according to the closing price of Kweichow Moutai, the buyer would still have a slight profit, at least avoiding significant losses on the day of purchase. If they bought other stocks at a low point, it would be possible to make a profit of more than 5%, or even more than 10%, on the same day. The difference between a 10% loss and a 10% profit is already quite significant. This illustrates that under the same bull market conditions, investors with different mindsets can achieve vastly different investment outcomes.

Therefore, even in a bull market, investors must maintain a sense of reverence. There has always been a saying in the stock market, "revere the market." Many investors interpret this reverence as a fear of bear markets because it is difficult to make money and easy to lose money in a bear market. Thus, many investors indeed have a reverent attitude towards the market during bear markets. However, in a bull market, they believe that making money is easier,操作简单, and that they can simply buy indiscriminately to make profits, leading to a lack of reverence for the bull market. This attitude towards the bull market is clearly mistaken.

The reason for maintaining a sense of reverence in a bull market is that risks still exist. For example, there is the risk of excessive short-term gains in the overall market or individual stocks. When there are excessive short-term gains, the market or individual stocks often experience a correction trend, and the correction幅度 in a bull market is usually quite large, otherwise it would not be effective in cleaning out the market. Such corrections often mean investment risks for investors who buy at high prices.

Additionally, there is the risk of negative news for individual stocks. Most notably, as the stock market has risen recently, a group of major shareholders of listed companies have become restless and have announced plans to reduce their holdings. For companies with significant gains, if major shareholders reduce their shares significantly, it can have a negative impact on the stock price. Investors need to closely monitor such negative news for individual stocks.For instance, consider the risks associated with hot topic shifts. Although in a bull market, all individual stocks have opportunities, these opportunities often emerge on a rotating basis, and market speculation is usually based on hot topics. Stocks that are hyped due to hot topics can typically achieve greater price increases. However, hot topics can also change. Therefore, for hot topic speculation, investors should also guard against being the last one to hold the bag.

In fact, precisely because bull markets also carry risks, investors need to have a heart full of reverence. Thus, for bull markets, investors should primarily focus on holding stocks and should never easily short sell. They can engage in small amounts of high selling and low buying. Unless the stocks they hold are heavily speculated upon by the market, investors can sell more as the price rises, and completely liquidate their positions when the speculation cools down. For investors with light positions, it is still important to adhere to the principle of buying on dips, or use a small amount of capital to chase rising prices, while paying attention to controlling investment risks.

Actually, it is this reverence for bull markets that makes it essential for investors to maintain a certain level of stock positions, even when the stock market is sluggish. One should not liquidate all their stocks at low levels just because the market is down. When a bull market arrives, investors with light or no positions are very likely to be left behind by the bull market, which can put them in a passive situation. This is how the current market rally was initiated.