CMSC: Has A-share effectively overcome the resistance to turn losses?

CMSC releases research report, stating that high or improving sectors to watch in the future include machinery, silicon materials and wafers, lithium carbonate, automobiles, consumer electronics, furniture, leisure food, and electricity. The bank previously mentioned that after a period of rapid growth, the market will experience oscillations or adjustments in the densely traded areas, with the adjustment period possibly being short or long. The market needs to undergo sufficient turnover, resulting in a significant reduction in trapped funds, while investments made during the adjustment phase gradually enter the floating profit stage. At this time, the market continues to focus on upward momentum. However, for the market to effectively break through the resistance and turn losses into profits, stocks themselves need to change. Historically, the market's effective breakthrough of resistance into stage II of a bull market is often driven by fundamental forces. Important signals include positive profit growth and accelerated improvement. The only exception was in 2015, when entering stage II of the bull market was purely a result of the self-reinforcement or positive feedback of leveraged funds. Against the backdrop of improving corporate profits and deepening industry trends, the market finally broke through the "resistance point". At this point, the market generally enters the floating profit state, and investors' mindset shifts from turning losses into profits to expecting more profits in the future. As the shift to a profit-making state continues to boost investor confidence, investors will further increase their investments in profitable ways and investment tools whether it be directly buying stocks, buying stocks on margin, or investing in funds. The market then enters the classic positive feedback loop of "making profits, adding leverage, driving further market growth, and continuing to add leverage", as major financial markets' movements have all relied on this feedback mechanism. To establish incremental capital's positive feedback mechanism, the index needs to break through the aforementioned resistance point. From the perspective of the past five years, the Shanghai Composite Index's resistance point is around 3450 points, while the WIND Full A Index is around 5400 points. Starting from July 11, the WIND Full A continued trading above 5400 points, effectively breaking through the resistance point. This week, the overall trend of the A-share market was relatively strong, mainly due to: 1. Disclosure of performance reports nearing completion, with some tech leaders submitting better-than-expected results, significantly boosting market expectations; 2. Overseas macroeconomics relatively stable, with all global risk assets showing a fluctuating upward trend; 3. Phase improvement in US-China relations, with trade in technology between the two countries resuming, boosting market confidence. In June, the year-on-year growth rate of social retail sales narrowed, and smartphone production saw a year-on-year positive change. In June, the year-on-year growth rate of total social consumer goods retail sales narrowed, as the effects of expanding consumption policy continue. Areas where the economy improved this week mainly include: 1. In June, the three-month rolling year-on-year growth rates of photovoltaic cells, industrial Siasun Robot & Automation output expanded, with significant improvements in sales of major companies in the engineering machinery sector; 2. Improvements in retail sales of furniture and automobiles in June related to the expanded consumption policy; 3. Positive year-on-year growth in smartphone production in June, with the growth rates in integrated circuit production, imports, and exports expanding on a three-month rolling basis; 4. Positive year-on-year growth in thermal power generation in June over the last three months. Sectors to watch in the future include machinery, silicon materials and wafers, lithium carbonate, automobiles, consumer electronics, furniture, leisure food, and electricity. Net capital inflows from financing activities, with a net outflow from ETFs. The total net inflow of financing funds in the first four trading days amounted to 28.57 billion yuan; 11.86 billion shares of new equity mutual funds were established, an increase of 8.57 billion shares from the previous period; there were net redemptions from ETFs, corresponding to a net outflow of 15.08 billion yuan. The net inflows of financing funds were in computer, electronics, and machinery equipment; more purchases of securities ETFs, while more redemptions from healthcare ETFs. Significant shareholders have increased in size, with planned reduction sizes decreasing. ChatGPT Unified intelligent agents have emerged, with the super-individual model becoming a future trend. In the early hours of July 18th Beijing time, the founder of OpenAI, Ultraman, and team members went live, unveiling ChatGPT (Unified Intelligent Agent, ChatGPT Agent) with a strong presence. Its core integrates the technological advantages of the three previous products: Operator's web autonomous search capabilities, Deep Research's logic and integration capabilities, as well as ChatGPT's strong conversational and expressive abilities. Combining these three technologies, it can use your computer to search the internet and directly create PPTs or Excel files. Based on RL Scaling end-to-end reinforcement learning, it has an extremely high data utilization rate. The model's controllability is high, allowing humans to interrupt or take over tasks at any time. Additionally, for critical operations such as account logins or file modifications, it actively confirms with humans to ensure security. Overall, the A-share valuations have risen this week, with the Wind Full A Index PE (TTM) increasing by 0.14 compared to last week, placing it in the 57.5th percentile of historical valuation levels. Most index valuations have risen this week, with real estate, defense and military industry, and electronics leading the way in valuation increases, while media, utilities, and non-banking financials leading in valuation declines. Risk warning: Economic data falling below expectations, incomplete policy understanding, and unexpected tightening of overseas policies.