Market Hits Freezing Point Again: How Much Longer Until the Downtrend Stops and Stabilizes?

Affected by the Middle East situation and last Friday’s sharp decline in U.S. stocks, today’s A-shares experienced a significant drop.

As of the close, the three major indices of the A-shares all weakened, with the Shanghai Composite down 3.63%, briefly falling below the 3,800-point mark. The Shenzhen Component Index and the ChiNext Index declined by 3.76% and 3.49%, respectively.

Market turnover exceeded 2.4 trillion yuan, an increase of over 150 billion yuan compared to the previous trading day. Most stocks declined, with the median change at a 5.65% decrease.

In recent days, several phenomena have emerged in the market.

First, after the double bottom points on Thursday last week, the market again showed a double bottom today. After the morning auction, only 221 stocks were up; by the close, only 305 stocks gained.

Additionally, the market was at a bottom at last Friday’s close, marking three consecutive trading days of bottoming out.

Second, on March 17, March 20, and today, the Shanghai Composite Index experienced afternoon declines with no resistance from bulls.

Finally, today’s market opened lower, then rebounded, only to sell off again—this is the third such occurrence since late March 13.

This pattern of opening low, rebounding, and then falling can make bottom-fishing funds hesitant. Funds trying to buy the dip and those cutting losses are both happening simultaneously, ultimately leading to shared losses.

Small-cap stocks have become the “hardest hit” during this adjustment, with the China Securities 2000 Index and micro-cap stock indices both falling more than 5%.

The ChiNext Index, which once was expected to lead a market breakout, also filled the gap from March 10 today, but was ultimately dragged down by the sharp correction on the main board.

The Shenzhen Component Index today broke below the range established from late January to mid-March with a gap down, indicating a slight premature move in the correction.

The Shanghai Index returned near the bottom of last September to December’s range, which provides some support but does not mean the market correction has ended.

Today’s market saw some increased volume, but selling pressure was not obvious. If the market declines again tomorrow with significant volume, there could be a chance for a bottoming rebound.

In my view, three points should be watched for a potential market turnaround:

1. A leading sector emerges. This sector should have certain characteristics: innovative themes with large imagination space that cannot be quickly disproven; low institutional holdings and investor attention; and a relatively low position in the market.

2. A major event occurs that can reverse the trend.

3. The correction has enough room to develop. Last year’s rally was driven by the trade war; could this year’s rebound be driven by the Middle East situation? It’s worth pondering.

If the first two points do not materialize, then only the third point remains—watch whether a spontaneous turning point appears in the market.

Historically, in the A-shares market, such sharp short-term declines tend to be followed by about 20 trading days of oscillation and consolidation if the correction space is sufficient.

For example, after a significant correction from late January to early February 2018, the Shanghai Composite experienced 24 days of sideways rally.

Similarly, in February 2020, affected by the pandemic, A-shares saw a sharp single-day drop followed by over 20 days of rebound.

Another example is the two major corrections from January to March 2021, after which the Shanghai Composite also experienced over 20 days of sideways movement.

Recently, I have been noting that the trend in the first three months of this year resembles that of September to November last year, which required oscillation and correction to create space for future gains—I believe many remember this well.

CITIC Securities (600999) states that, from a technical and sentiment perspective, A-shares are now in the latter half of this decline, with limited room for further sharp drops. However, external shocks could still trigger phase volatility, and confirming the bottom will take time and space.

CaiXin Securities notes that recent increases in overseas macro events have heightened uncertainty. “Stagflation-like” trading has warmed up, and a trend-based rally still awaits. From the Spring Festival to late April, the market is likely to fluctuate within a wide range, with increased volatility. It is advisable to control positions reasonably and wait for spontaneous market turning signals.

While the market is adjusting, some good stocks should not be sold off cheaply.

If good stocks are sold at a discount during a sharp correction, it will be difficult to buy them back at higher prices when the market recovers, causing many to miss out on bull stocks. “I once sold a bull stock at the bottom…” This is no joke.

Another point is that market worries tend to be released within a few trading days. If you hold stocks with large losses, blindly cutting losses is not advisable; patience and rationality should prevail after emotions subside.

In terms of sectors, only coal and oil industries closed in the green today, while all concept sectors declined. Under such a sharp correction, the risk-reward ratio and tolerance for errors are low.

Currently, earnings reports are being released. In the context of significant market adjustments, some companies with disappointing results should be cautious.

For example, Baiyunshan (600332), which hit the limit down today, is expected to have a net profit of 2.983 billion yuan in 2025, but in the first three quarters, it reported 3.31 billion yuan, meaning a loss of about 327 million yuan in the fourth quarter.

Now, let’s look at today’s news.

1. According to Xinhua News Agency, Iran’s Ministry of Foreign Affairs issued a statement on the 22nd, stating that the Strait of Hormuz is not blocked. Ships can continue to navigate through the waterway under necessary measures taken due to the war situation.

The statement said that ships belonging to the U.S., Israel, and other involved aggressor countries do not meet normal and non-hostile passage conditions, and Iran will handle them according to law; ships from other countries or non-hostile ships related to them, as long as they are not involved in or cooperating with aggression against Iran and comply with Iran’s safety regulations, can pass safely after coordination with Iranian authorities.

2. The Ministry of Industry and Information Technology’s Department of Energy Conservation and Comprehensive Utilization is conducting research on building a recycling system for discarded new energy vehicle batteries.

3. Fatih Birol, head of the International Energy Agency (IEA), said he is communicating with governments worldwide and may release additional oil reserves if necessary.

4. Alibaba’s DAMO Academy is expected to release an important chip product tomorrow (March 24), possibly targeting the AI agent computing power demand that has surged this year.

Finally, a summary: today’s market saw a sharp correction. The Shenzhen Component Index just broke below the upper range, indicating potential further downside tomorrow. If the decline continues with high volume, it could signal a chance for stabilization and a bottom. In trading, control your positions, watch for opportunities, and consider entering only when volume confirms a reversal.