On Thursday, A-shares exhibited volatile trading with heavy volume, finishing the session on a soft note. By the closing bell, the Shanghai Composite Index stood at 3930.12 points, down 0.30%, while the Shenzhen Component Index shed 0.79% and the ChiNext Index slipped 0.78%. The market's breadth was negative, with approximately 2,400 gainers being outpaced by over 2,900 decliners. Turnover on the two major exchanges reached roughly 2 trillion yuan, expanding by more than 200 billion from the previous day, reflecting persistent capital divergence. By sector, aquaculture, film and television, gaming, and software led the gains, while technology segments like industrial mother machines, semiconductor equipment, and chips were comparatively weak.

This week, the market largely maintained a narrow-range consolidation pattern, characterized by fragmented hotspots and accelerated sector rotation. On Monday, the Shanghai index opened slightly lower due to external factors but experienced an afternoon recovery, closing as a solid bullish candlestick that reclaimed the annual moving average, edging closer to prior highs. Tuesday saw the index dip for consolidation before attempting an upward push, briefly setting new highs for the July rebound; however, buying momentum waned, and divergent intentions among bulls led to a high-level close with an upper shadow. Wednesday's session was pressured by renewed turbulence in Japanese and South Korean markets, causing the Shanghai index to open lower and trend down, leaving a downside gap on the daily chart. Over Thursday and Friday, the market repeatedly probed for direction, printing consecutive inside candlesticks with heightened fluctuations.

Early in the week, investors had hoped that a decisive breakout would make the 4000-point level a foregone conclusion, but Thursday's downturn reignited worries about downside support. Many investors are left asking, "What happens next? Will the rally continue?" Our stance remains neutral. The current candlestick patterns are oscillating between trendline support and overhead resistance, with the trading amplitude narrowing as the market edges closer to a critical juncture for direction selection.

From a technical perspective, this consolidation is far from chaotic; it reflects a cyclical tug-of-war between the bulls and the bears within a defined range, where chips are being continually exchanged. This type of converging oscillation typically indicates energy accumulation, setting the stage for the next trending move. If volume expansion accompanies a breakout above the upper band, bullish dominance will be confirmed, potentially sparking another leg up. Conversely, if the index falls below the lower band on shrinking volume, technical selling pressure could trigger a pullback phase. History offers parallels: April of this year saw a volume-backed breakout that started a prolonged rebound. However, the descending triangle that resolved lower in March 2022 led to accelerated declines and a significantly extended correction period.

Looking ahead, the market lacks incremental capital, which means it will likely remain a zero-sum game among existing funds for some time. The index is expected to fluctuate within its range while awaiting a clear directional choice and the emergence of a future leading theme. On the volume side, recent turnover has contracted, signaling that while in-market selling pressure has eased, new money is not eager to enter. The steady decline in transaction value from the earlier high-volume phase suggests that committed holders are less inclined to sell: much of the panic-driven selling has been absorbed, and remaining holders either hold low-cost positions with healthy gains or are trapped and choosing to wait patiently. That said, the motivation for outside capital to enter remains weak. With no obvious profit effect or mainline direction, a wait-and-see mood prevails, and new capital is reluctant to wade in at current levels. This has produced a low-volume equilibrium where there are fewer sellers, but buyers are not aggressive either.

Regarding chip structure, after the violent swings of June and July, the market is navigating a complex rebalancing phase, making it difficult for a cohesive force to form in the near term. The turbulent sessions of June and July prompted substantial capital to establish positions near the staged rally's peak. These holders carry average costs clustered around those prior highs, leaving their current prices significantly underwater. That overhang forms the most immediate source of resistance: whenever the index rebounds toward that cost zone, concentrated selling pressure to break even is unleashed, creating a negative feedback loop of "sell-the-rally." Countering that are investors who accumulated near the earlier lows and are now sitting on substantial paper gains. While under no pressure to sell, their profit-taking motivation persists, especially when the market lacks a clear upward path. The "cash in and stay safe" mentality tends to strengthen as the consolidation drags on, creating another latent source of selling.

Over a longer timeline, the fundamental case for A-shares remains intact, with the market shifting from a phase of valuation expansion to a structural bull market driven by tangible corporate earnings improvements. On the macroeconomic front, China's core narrative of industrial upgrading and the shift from old to new growth drivers continues to deliver. Earnings momentum is accelerating away from traditional sectors, with technology and overseas expansion emerging as the twin engines reshaping A-share profitability. These two sectors now account for close to 40% of combined profits for A-shares excluding financials. The implication is clear: A-share earnings are increasingly decoupling from the property and infrastructure chain, turning instead toward manufacturing upgrades and global market development. This internally driven growth rotation frees the A-share earnings cycle from over-reliance on traditional domestic demand, laying the groundwork for a renewed cycle of earnings expansion.

From an asset allocation perspective, as global capital engages in a broad reallocation, the evolving power dynamics between China and the U.S. across comprehensive national strength, industrial competitiveness, and technological innovation are lifting the appeal of Chinese equities. Externally, after multiple rounds of volatile adjustments, valuations on the domestic equity market have fully digested speculative froth, and with steady economic repair and flourishing emerging industries, the risk-reward profile is increasingly attractive, positioning China as a key destination for diversified global capital. Domestically, as household wealth grows steadily, a long-term inflection point in asset allocation is underway. The waning investment appeal of real estate and declining yields on low-risk wealth management products naturally channel funds toward the equity market. This trend has strong staying power and is unlikely to reverse on short-term market swings. Taken together, overseas long-term capital increasing its allocation and domestic household wealth flowing into markets are jointly reinforcing the market's capital base, providing solid, sturdy support for the mid-to-long-term trajectory of A-shares.

On the operational front, a strategy of trading positions with the swings and layering into allocation positions on dips appears to be the most sensible recent approach. On the trading side, while a clear single-directional trend remains unconfirmed, chasing rallies or panic-selling in this range-bound market is undesirable. When the index pulls back to the range's lower boundary and shows signs of stabilization on shrinking volume, adding exposure moderately may be appropriate. Conversely, if the index approaches the upper boundary without a commensurate volume expansion, trimming positions to lock in gains could be prudent. The 4000-point round number has clearly emerged as major overhead resistance, with several attempts failing to register a clean breakout, forming a horizontal barrier. On the chart, a blue trendline, connecting the swing lows since the approximate 3741-point bottom, acts as obvious support, signaling periodic buying interest beneath the market. With higher lows and capped rallies, the index is forming either an ascending wedge or a range-bound base-building pattern. The market is effectively undergoing a chip-exchange process that buys time for space. The technical picture is one of energy accumulation, with support underpinning the downside and pressure overhead that must be digested, as the market gathers strength to seek its next breakthrough.

If a subsequent test of the 4000-point barrier arrives with clearly expanding volume (at least above the 20-day average volume), the odds of a genuine breakout are favorable. A low-volume test, however, would likely send the index back down. For allocation strategies, a phased buying plan is the recommendation: adding positions gradually on each pullback toward key support levels to average down costs, anchored to mid-to-long-term industrial trends and corporate earnings improvements, trading time for space while awaiting a value reversion driven by earnings growth. The core value of phased buying lies in hedging away the timing risk of identifying the absolute bottom. Current valuations hover around the lower end of historical ranges, making the mid-to-long-term allocation attractiveness evident. Yet, with multiple headwinds including macroeconomic expectations, external conditions, and investor sentiment, a smooth trend is unlikely in the short term. The index will most likely continue to grind out a base in repeated cycles of bottom-fishing and consolidation. Betting the house on a single entry point risks amplifying paper losses if the market dips first, while staying entirely in cash risks missing the window to build positions. A phased approach smooths out timing risk across the entire bottoming range, allowing conviction to accumulate cheap chips during market declines while retaining ample cash as a buffer against extreme volatility, making it the most cost-efficient allocation strategy during this basing period.

This week, gold continued to trade in a sideways range. Fundamental backing for the precious metal remains solid, and any pullback could present a compelling opportunity to increase holdings. On the technical front, gold has decisively broken through a trendline that had capped prices for roughly six months, underscoring the unified strength of the bulls. The breach of this key resistance level, which had been pressing down from the year's highs, was not a fleeting blip but rather the culmination of a long accumulation phase by bullish forces. More importantly, after an extended period of base-building and distribution, gold broke upward on a powerful bullish candle, a formation often viewed as a continuation signal within an uptrend.

On the fundamental front, recent selling pressure has stemmed primarily from a combination of forced sales by certain central banks grappling with exchange-rate pressure and profit-taking by long-term, mid-to-long-term players. Some emerging-market central banks, facing currency depreciation and reserve shortfalls, have had to liquidate portions of their gold holdings to shore up foreign-exchange liquidity, creating temporary downward pressure on the metal. Concurrently, long-term allocation funds, having amassed significant unrealized gains from gold's earlier rally, have begun to take profits in stages as prices hit psychologically significant targets. Consecutive declines in commodity funds and ETF holdings suggest active long-position unwinding, which further saps upward momentum. However, these selling pressures are largely temporary, and the strategic case for central bank gold accumulation has not fundamentally shifted, which preserves gold's long-term allocation foundation.

In terms of market expectations, concerns linger that the Federal Reserve might pivot to a tightening cycle of rate hikes or balance-sheet reduction, which would weigh on gold. We argue, however, that the constraints of capital-market liquidity mean the Fed's room for tightening is likely more limited than markets anticipate. The U.S. fiscal sustainability issue, underlined by a debt load approaching $40 trillion, fragility in regional banks and commercial real estate, and weak underlying economic momentum have effectively capped any room for hiking rates. Moreover, the current inflation rebound is primarily driven by geopolitical supply-side shocks, which are not easily tamed by monetary policy. Combined with political constraints in an election year, the Fed has little room to aggressively tighten.

Looking forward, rising risks of renewed U.S. inflation, and even possible stagflation, global sovereign debt expansion, and heightened systemic geopolitical risks all serve as long-term supportive factors for precious metals. Investors should keep an eye on the Gold ETF (518800), which tracks the AU9999 price on the Shanghai Gold Exchange. Additionally, the Gold Stock ETF (517400) stands to benefit from gold price appreciation and is also worth monitoring.

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