With less than ten trading days left before the close of 2023, if there are no surprises, the Shanghai Composite Index will end the year with five consecutive monthly declines.

This means that since the second half of the year started in August, the Shanghai Composite Index has never seen a positive month.

The last time the Shanghai Composite Index had five consecutive monthly declines was from April to August 2004. After that, it reached the ultimate bottom in June 2005 at 998 points.

The point at which the five consecutive monthly declines ended was 1342 points, which is a 25.6% drop from the bottom of 998.

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If calculated by the time cycle, the time to the bottom is exactly ten months.

Additionally, the sixth month after the five consecutive declines saw a rapid rebound. In just ten trading days, the index rose by 18.8%, then continued to search for the bottom.

That is, after a continuous decline, there will definitely be a counterattack rebound.

Looking back further, there were five consecutive declines from June to October 2003, and from March to July 1994. After both sets of five consecutive declines, the index rebounded sharply.

Among them, the rebound in 2003 saw the Shanghai Composite Index rise by 36%, and in 1994, it soared by three times.In other words, behind the five consecutive days of decline, the indices have all rebounded to varying degrees, and the strength of the rebound is not small.

This indicates that the tighter the spring is compressed, the greater the elasticity.

At the same time, the Shanghai Composite Index has never experienced a situation of six consecutive monthly declines.

This demonstrates that the big hand behind the Shanghai Composite Index does not tolerate the index falling for half a year even in the most pessimistic situation.

Therefore, after five consecutive months of decline, there is no need to be too pessimistic, as the possibility of further decline is extremely slim.

In the most pessimistic case, it is necessary to wait for a rebound before there is a risk of further downward movement.

At the end of this decline, it is essential to maintain sufficient optimism and never cut losses at the bottom.

Although the monthly line has five consecutive declines, it is not far from a rebound, but it also sends a not-so-good signal that the adjustment cycle is prolonged.

As previously mentioned, in 2004, 2003, and 1994, there were situations of five consecutive monthly declines.Each time there was a rebound, but after the rebound, the market continued to weaken and fell again.

Among them, the decline in 2003 lasted until 2005, and the bottom of 998 appeared, with a gap of 20 months.

After the five consecutive declines in 2004, the index still adjusted for as long as 10 months.

The five consecutive declines in the monthly line released a relatively pessimistic signal, that is, the market situation is relatively bad, especially the stock market expectations driven by the macroeconomy.

Whether it was 1994 or 2003-2004, the macroeconomic situation at that time was relatively average, and the market expectations were also relatively bad.

Especially in 2001, after the index topped at 2245, the index fell all the way.

There were several rounds of policies on the way, but they have not been able to stop the decline.

If viewed from the technical form, the trend from 2001 to 2003 is very similar to the trend from 2021 to 2023.The index, after experiencing two rounds of declines and two rounds of rebounds, has seen a five-day losing streak.

After the five-day losing streak, there will be a rebound, followed by a significant adjustment.

We need to understand one thing.

Under what kind of pessimistic expectations would the market see a five-day losing streak?

The index continues to fall without any decent rebound in between, indicating that the market's pessimistic atmosphere is very high.

It's not just the pessimistic atmosphere, but it also indicates one point, that is, the market's capital is actually unanimously bearish.

For five consecutive months, there has been no decent bottom-fishing capital.

Even though everyone is shouting about a rebound and a bull market, the behavior of capital is very honest, there is a risk here.

That's why the capital is indifferent, there is no strong willingness to bottom-fish, and the choice is to lie flat.

So, what are the methods to resolve the risk?In the final analysis, there are three main approaches.

1. Continuous decline to reduce risk.

Declines are not risky; it is the rises that pose the risk.

In a continuously declining market, valuations will only become cheaper and cheaper, and opportunities will naturally increase.

Even in the case of a financial crisis, there will eventually be capital that will bottom out, leading to a recovery.

The key issue lies in whether the asset's price is cheap enough, because if it is cheap, naturally people will buy it.

If the market were to fall below 2000 points now, would it still be as entangled as it is at 3000 points? Definitely, all kinds of capital would be scrambling to get a piece of the action.

Therefore, a decline can dissolve risk.

2. Waiting for time to digest the bearish news.

Time is very important, not because it can release good news, but because the bearish news will be forgotten.More importantly, the allocation of funds requires a time cycle.

It's not just a matter of entering the market and buying immediately.

Large funds have a substantial volume, and they must enter at a relatively low point and have enough time to bottom out, allowing them to pick up cheap chips.

If they don't have enough chips in hand, they will resolutely not push up the stock price.

In addition, the decline represents a not very optimistic expectation, and time can verify the market's own judgment.

3. Introduce new large funds to bottom fish.

It's not enough to just talk about it; the market needs real money to bottom fish.

As long as the above two points are met, this third point is almost a foregone conclusion, but it is just a symbolic signal.

The market's funds are not at all foolish; what they need is market stability and policy support.

Therefore, they will be well-prepared before the policy is released, waiting for the starting gun to sound.The larger the capital, the less likely it is to be a philanthropist; everyone is thinking about making money, so there must be a party that suffers losses.

Only large capital, with prior knowledge of the listed company's situation, dares to invest recklessly.

And these funds, without the support of policy dividends, will not easily enter the market, nor will they correct mistakes.

At the beginning of each bull market, we will find a phenomenon, that is, the three elements of risk resolution coexist.

That is, the index falls to an unbelievable low price, and the adjustment time cycle is long enough, and finally, new large capital is guided into the market to bottom fish.

The three seem to be indispensable.

So let's review the current market.

1. The market's position is cheap, but it is not yet unbelievably cheap.

The market valuation is low, just like the previous few bear markets.The market valuation is not extremely low; it hasn't reached the extreme values of the market, which means there is still room for further decline.

There is no absolute truth in valuation.

Whenever capital feels it's expensive, the valuation can still go down, and there is a basement below the floor.

2. The adjustment cycle has been relatively long, but it has not yet reached a sufficiently long duration.

If we start counting the adjustment cycle from February 2021, it has been 34 months, but it hasn't reached three years.

The great bear market from 2001 to 2005, and the great bear market from 2010 to 2014, both spanned 3-4 years.

The compound bear market from 2015 to 2018 also lasted for 3-4 years, and this cycle can be considered inevitable.

From 2021 to 2025, perhaps it will be the end of a major bear market cycle.

3. The market is trying to attract capital, but the visible funds are not many.

Central Huijin Investment Ltd. is bottom-fishing, and state-owned capital is taking action, but the actual proportion of funds invested is relatively limited.Seemingly a grand gesture, in fact, for an 80 trillion market, it's just a drop in the ocean.

Without an increase at the trillion level, it is very difficult for the market to make a complete turnaround.

Existing funds can only organize a small-scale rebound, and they are still cautious, creating a structured market trend.

This five-day consecutive decline is not the curtain, perhaps it's just a prelude, and the good play behind it is still very long, and there are still many opportunities.

If you can suddenly understand the mystery, look back at the market again, there are actually a lot of opportunities, the key is whether the rhythm is right.