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Volume contraction rotation seems to be a new term, and it is also a relatively uncommon term.

There seems to be no inevitable connection between volume contraction and rotation.

Rotation itself, whether it is volume contraction or volume expansion, can be carried out.

However, in the case of volume expansion rotation, funds tend to be large inflow and outflow, and the focus is on large sectors.

In the case of volume contraction rotation, large funds actually do not have much action, and it is more inclined to the speculation of themes.

But the problem arises, the recent volume contraction rotation, the speculation is relatively large sectors.

The transaction volume of about 800 billion yuan, not only has real estate moved, but also photovoltaic, and occasionally has to take care of the big technology.

They are all sectors that absorb a lot of money, and they need to attract a large amount of funds to be able to speculate.

Such a rotation market, with a transaction volume of about 800 billion yuan, and with an index range of 3100-3200, makes people feel very strange.

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After all, the sustainability of volume contraction rotation needs to be verified.In the second half of 2023, there was also a phenomenon of reduced volume rotation.

But at that time, the speculation was all about themes, focusing on small and medium-sized market value stocks, and not rotating in large sectors.

Speculative capital was rampant, while the main force was lying flat, with not much trading volume, and retail investors and speculative capital were playing a game of chess, which is a normal market situation.

However, the rotation of large sectors is usually a game between the main forces, and it is strange to see a reduced volume.

So why did the market experience a reduced volume rotation situation?

1. The existing funds are very limited.

In fact, there are not many existing funds in the market.

This can be seen from the long-term reduced volume.

In March, the highest trading volume was 130 billion, in April it was 110 billion, and in May it was barely over 100 billion.

This indicates that funds are receding, and a large part of the funds have chosen not to play and have left the market.These large funds are far more intelligent than ordinary retail investors.

Therefore, when the market experiences a significant drop, there won't be particularly large trading volumes, as the funds have already retreated in advance.

Retail investors may not have noticed that the number of players at this table is actually decreasing.

In fact, the lack of incremental funds is common knowledge.

Or, to put it another way, it is normal to have no incremental funds above 3,000 points.

If there were no large funds buying and laying out below 3,000 points, how could they wait until the price rises above 3,000 points to buy?

The decreasing existing funds are hard to support the entire market in the long term.

The market can only lock positions and rotate, which also forms a situation of reduced volume rotation.

2. The risk of speculating on hot topics is very high.

This year, many funds are not daring to speculate on hot topics and hot spots.The reason is that the risk of ST (Special Treatment) stocks is too high this year, or in other words, the risk of stepping on a "mine" is too great.

Capital cannot withstand the frequent "mines", they want to make money, not to step on mines.

Moreover, the ability of hot money to "demine" is far inferior to that of professional and well-connected funds such as the social security fund.

In fact, many hot money has stepped on the "mine" in a certain computing power stock.

And the repeated speculation afterwards is just a series of self-rescue by the funds that stepped on the "mine".

Since the market's weathervane is not about speculating on small ticket themes, these medium-sized, or even slightly larger market value stocks in the popular sectors have become the hot cake.

The market's stock selection logic has changed, and it has started to shift towards some component stocks with certain performance.

This change in style is irreversible.

3. "Northbound" has become the main force.

Many people have not carefully observed the market.Simply from the perspective of the publicly disclosed top trader information, the one that has long dominated the top spot is surprisingly the Northbound funds.

The term "Northbound" here is likely not the real Northbound, but more like a wolf in sheep's clothing.

Due to the strict domestic regulation, every move of the funds is tracked with data, and it is relatively easy to be investigated.

Even if the Northbound data is monitored, it is quite challenging to find the specific seats and then take concrete measures.

After all, we are adopting an open attitude, inviting the Northbound to participate in the game, and we cannot just arrest people on a whim.

These funds that take the Northbound route to speculate on hot spots in the market are even more "unrestrained" than domestic funds.

There are often a large number of matched trades, and they are almost all in and out quickly.

The reason for speculating on large sectors is that many small thematic stocks are not within the trading scope of the Northbound and cannot be speculated on.

What the Northbound can buy is more inclined towards the leading stocks of various sectors, which is why they focus on these large sectors and some leading stocks.

From this perspective, domestic capital is the stock, while the Northbound has become the increment.The incremental capital enters and exits quickly, shearing the sheep and then retreating immediately.

4. The market needs rotation for arbitrage.

This may be the most critical reason.

Arbitrage in the stock game, which is the main way for existing funds to harvest.

If you don't rotate, and stick to the structural market as before, focusing on a main line for speculation, making the market from beginning to end, you can't make money anymore.

Because most sectors have no imagination, no room for speculation.

The market now focuses the main direction of rotation on the oversold, and it is a trend of oversold.

Whether it is real estate or photovoltaic, these are the main directions of oversold, not the main directions of high-position group hug.

The rotation at a low position is mainly for arbitrage, buying at the bottom of the downtrend channel, and ending at the top of the trend channel.

The rotation at a low position gives most retail investors a sense of security, space, and a direction with high returns and low risks.This direction is more likely to win the favor of funds, with more ample follow-up orders, and is more suitable for the stock market.

Therefore, whenever there is news stimulation, these sectors will experience short-term and rapid rises, and then consume a part of the stock.

This seemingly speculative approach is actually a way of arbitrage, which is the essence of rotation in the stock market.

The main reason why the market tends to rotate rather than rise universally is still a lack of money.

A market without an increase can maintain stability, which is already very good.

The rise of the market is mainly driven by funds, and this underlying principle is never changed.

A market without money is always unstable, even if it has been very carefully protected.

Artificial regulation is difficult to change the essence of the market, and the hot spots of large sectors in stages are just another way to trap people.

This market will not be particularly healthy until it has truly completed the construction of the bottom.The emergence of various "abnormal" trends, with a divergence between volume and price, is also a normal phenomenon.

However, this kind of rotation must be short-term, a trap for people, not for everyone to make money.

Any abnormal behavior ultimately has a predetermined outcome, almost without exception.

Because the capital in the capital market is to make money, it is bloodthirsty, not for charity.

When everyone pushes the stock price to a high level, and then it consolidates with a reduction in volume every day, and the retail investors all retreat in unison, who will take over the position?

Respecting the laws of the market and not participating in the market trends that you do not understand is of utmost importance.