Is domestic capital being timid and skewing the index? Don't panic, small caps are secretly having a blast! How will the afternoon go?

This A-share market is really about “going its own way while letting others rise!” Just look at the US stock market, where the Dow and S&P 500 closed at all-time highs, shining brightly. As a result, A-shares faced another wave of despairing sell-offs in the morning, habitually performing a “waterfall show,” with the three major indices opening mixed, but all showing a downward dive, which looks quite alarming; however, the performance of individual stocks offers short-term hope!

The truth is——the index is taking hits, while small caps (thematic stocks) are secretly enjoying themselves!

A closer look at the details reveals: the index is a fake drop, while individual stocks are genuinely rising! Even though the index has fallen, the number of rising stocks has been steadily increasing, definitely showing a “more up than down” trend. It feels like the “big guy” is getting hit, while the “small guy” is bouncing around.

The yellow and white lines reveal the mystery! The yellow line, representing the majority of mid and small cap thematic stocks, is high up, far away from the white line representing blue-chip stocks. The white line (blue-chip stocks) is crashing down, while the yellow line (small caps) is stubbornly climbing up; the contrast is very stark!

Who is selling off? Who is stabilizing? The main funds are indeed still on the run, with a significant net outflow, but today, the ones running away are mainly the “big guys” — the blue-chip sectors. Especially in big finance (banks are suffering the most, with securities and insurance also showing slight declines), real estate, liquor, and the “C-word” giants have stepped in to stabilize the index.

Where are the hotspots? Military industry (aerospace equipment), nuclear power, ultra-high voltage, and smart grids are the thematic sectors rising the most. The ones that are falling are consumer goods, components, lithium mines, and batteries, which are the racing stocks.

Limited impact from US AI? Overnight US stocks like Oracle, Google, and Nvidia, which are related to AI, fell, and this indeed affected some of our A-share AI cluster stocks like Yi Zhongtian, Cambricon, and SMIC, which also followed suit in the sell-off.

Bottoming out and recovering, warmth is starting to show! After that wave of sell-off in the morning, the market slowly bottomed out and recovered, and this wave of warming started from individual stocks, with small caps bouncing back first.

Insufficient trading volume is a hidden danger! The trading volume in the morning was shrinking, indicating that both buying and selling intentions were not very strong, and the momentum for a rebound is a bit lacking.

So, how will the market move in the afternoon? Let's boldly predict:

The index is likely to maintain fluctuations! Blue-chip stocks (especially big finance) are not performing well, so expecting a V-shaped reversal and a big rise in the afternoon is unrealistic. The Shanghai Composite Index is expected to continue fluctuating at a low level, with no significant upward or downward space. The Shenzhen Component Index and the ChiNext may perform slightly better, as they are more growth-oriented, but major breakthroughs are also unlikely.

The strong yellow line is expected to continue! Here comes the key! As long as blue-chip stocks (the white line) do not continue their frenzied selling, the yellow line representing thematic small caps, with its “high and mighty” momentum, is likely to continue outperforming the white line in the afternoon! The activity of individual stocks and the number of rising stocks may maintain or even further spread.

Internal rotation within hot sectors! The military industry, ultra-high voltage, nuclear power, and smart grids that performed well in the morning may show differentiation in the afternoon. Some that rose particularly sharply might adjust, but the overall direction (such as safety, domestic substitution, new infrastructure-related) is likely to maintain its heat. Funds might explore new supplementary targets within.

AI cluster stocks may stop falling! After the morning's sell-off, the AI cluster stocks affected by the US market may try to stabilize in the afternoon, even showing slight rebounds. But it will be challenging to recreate glory immediately; we need to observe the strength of fund inflows.

Key to watch the trading volume! Pay special attention to the changes in trading volume in the afternoon! If, during the rebound, the trading volume can gently increase (especially driven by active small and mid caps), market confidence will strengthen, and the rebound will be more solid. If it shrinks like in the morning, then it will be easy to drop again after a rise, maintaining a fluctuating pattern.

Avoid chasing high blue chips! For big finance and other blue-chip stocks, there are currently no significant reversal signals; unless there is a sudden large volume spike in the afternoon, it is better to watch more and act less, and not to rush to catch falling knives.

Light index, heavy individual stocks is the way to go! The afternoon's operational strategy revolves around “light index, heavy individual stocks.” The adjustments brought about by the index, especially the drag from blue chips, actually provide many quality small cap thematic stocks with opportunities for low absorption. Market sentiment has already been somewhat repaired in the individual stock recoveries in the morning.

To sum up:

In the afternoon, don't expect a big surge in the index; it would be good enough to stabilize without continuing to fall sharply, and it is likely to oscillate and grind down. The real opportunities lie in the “yellow line,” in those thematic small caps that do not follow the index! The heat in military industry, new infrastructure (ultra-high voltage, smart grid, nuclear power) is still present, and there are plenty of opportunities in individual stocks. Just be careful not to let the trading volume shrink too much, and avoid chasing high blue chips that are abandoned by main funds. The market shows significant differentiation, domestic capital is still timid, but smart money (or active retail investors) have quietly started to position in thematic stocks. Stay calm and focus on structural opportunities in individual stocks!