Source: CITIC Securities Research Article | Chen Guo Xia Fanjie’s sentiment index reached as high as 98.8 on October 8, which was the same as the sentiment high point on July 13, 2020. The market adjusted significantly in the following few trading days, and fell on October 17 to

At the end of March 2022, we launched the CITIC Construction Investment strategy-Investor Sentiment Index, which is synthesized from multiple market public trading indicators. This index better reflects the level of market sentiment at that time in the important ranges of the A-share historical market, and its extremely high and extremely low points can lead to market reversals, and has certain predictive capabilities. It should be pointed out that this index is used to describe the investor sentiment in the market and is a synchronous indicator. Its predictability is mainly reflected by the predictability of investor sentiment on the market.After the launch of the investor sentiment index, it has attracted the attention of a large number of investors. Therefore, starting from the end of April 2022, we will track and display the current market sentiment in the form of monthly reports, and give the historical trends of the sub-item core sentiment indicators. and latest trends. In August 2024, we launched another special report, reviewing the actual effect of market timing in the past two and a half years since the release of the sentiment index, and summarizing the performance of different market styles under different emotional states.

The market sentiment in October has been in the excitement zone for a long time, reaching the highest level in the past four years.

In last month’s sentiment monthly report, we pointed out that the current high investor sentiment means that the A-share market has entered a new stage, and we should take the Make investment decisions with bull market thinking. Judging from the experience of 2015, 2019 and 2020, after emotions enter the excitement zone, the market often continues to rise in the short term. There may be some adjustments in the market as sentiment falls later, but this adjustment does not mean the end of the bull market. This judgment was reflected in the high opening and fall of A shares in early October, but after eight trading days of adjustment, the market strengthened again and returned to the upward trend.

On September 24, the sentiment index surged sharply and left the panic zone, issuing a buy signal on the right. By September 30, the sentiment index exceeded 90, returning to the high zone after 3 years and returning to the euphoric zone after 4 years. Investors' enthusiasm continued to accumulate during the National Day holiday and exploded at the opening of October 8. Finally, the sentiment index reached as high as 98.8 on October 8, which was the same as the sentiment high sentiment position on July 13, 2020, and significantly exceeded the sentiment level in March 2019. Yue's mood is high. If you study the sentiment state of the market segment on the 8th, the sentiment at the opening should be very close or even reach the extreme level of 100, so this is a sell signal on the left. The market adjusted significantly in the next few trading days, falling below 90 on October 17, but returned to the excitement zone on the 18th. Since then, market sentiment has maintained a strong and steady upward trend until a significant decline occurred on November 1. Based on our experience during the 19-21 bull market, when the market is in a bull market (the index is above the annual line and half-year line) and investor sentiment is high (over 50), investors should maintain higher positions for a long time. Sell ​​signals are generally issued when the sentiment index is at an extremely high level or when some sub-indicators issue early warning signals. For example, on October 8, the extremely high sentiment index issued a sell signal on the left, as well as the turnover rate and stock-bond income difference at the end of October. , overbought and oversold and other indicators send out early warning signals, investors can accordingly reduce their positions significantly in early October and slightly in early November, and restore higher position levels after market adjustments.

We analyze each sub-indicator. Among the seven major indicators, the turnover rate, partial stock fund issuance, proportion of financing purchases, implied risk premium, and stock-bond income difference data have been smoothed by the 5-day average; the two indicators of exceeding 60ma and overbought and oversold were originally Weekly data are now unified on a daily basis in order to be more sensitive, and the 60-week moving average is essentially changed to a 300-day moving average. This caliber will be used by default below.

turnover rate: The A-share turnover rate in October is still above 2%. Historically, if the turnover rate exceeds 2%, it means that the market has entered an overheated state, and then the turnover rate often leads the stock index to fall back. The market has entered an overheated state in this round of market conditions, which has exceeded that of 2019 and 2020, and is more similar to 2015.

New issuance volume of partial equity funds: a500etf issuance promoted the rebound of fund issuance at the beginning and end of the month. As the market recovers further, the indicator is expected to continue rising, becoming a key indicator for tracking bull market sentiment. The indicator's surge to new highs often indicates a market top.

The proportion of financing purchases: declined slightly in October and is still at a relatively high level. This indicator once exceeded 10% in early October, but fell slightly in late October but was generally high. This reflects the substantial improvement in leveraged funds' expectations for the market outlook. Judging from the forward-looking significance of this indicator historically, the market is expected to remain strong in the next three months.

Implied risk premium: is at a mid-to-high level after a rapid decline. From June to September, this indicator rose sharply to the highest level in history. However, as A-shares recovered, this indicator began to decline rapidly in late September and is currently at a mid-to-high level, which means that the current allocation of equity assets is cost-effective.

The income difference between stocks and bonds: The money-making effect rose close to the high in June 2015, and began to fall at the end of the month. The stock-bond yield gap indicator, which reflects the short-term profit-making effect of investors, rebounded sharply at the end of September and was even close to 30% on October 28, which is very close to the historical high on June 5, 2015. This also indicates that market sentiment is about to reach a mid-term top, and thereafter the money-making effect and market sentiment are likely to fall back.

exceeds 60ma: the mid-range shock in October. This indicator depicts the strength of the market from a medium- to long-term perspective, reflecting the proportion of stocks in the market whose closing prices are above the 60-week moving average (300-day moving average). Historically, when this indicator exceeds 80%/is below 20%, it often means that market sentiment is overheated/too cold, and the market may reverse. This indicator basically fluctuated between 35% and 70% in October, and basically remained above 50% in the second half of the year, reflecting that the market is in a strong state from a medium- to long-term perspective.

Overbought and oversold: indicators were all above the zero axis in October, and the market entered a strong cycle, triggering a pullback from overshooting at the beginning and end of the month. This indicator depicts the strength of the market from a short-term perspective. The indicator has risen above the zero axis at the end of September, indicating that the market has entered a strong cycle. On October 8, it was close to 30%, and on October 31, it was close to 20%. The rapid rise of the indicator in a short period of time prompted the risk of the market overshooting and falling back.