Chart from TradingView In the past five months, the Shanghai Composite Index has been subject to a downward trend line and failed to break through four times.

But we don’t need to be pessimistic. For the downward trend line, it is inevitable that it will eventually be broken through. It is only a matter of time.

So don't worry, just defend well.

Looking back on the past week, in fact, the global market is still booming. U.S. stocks have repeatedly reached new highs, the prices of commodities have continued to rise, the U.S. dollar has continued to slump, and foreign investors have bought heavily.

We don't see many negative factors from the fundamentals.

But the Shanghai Composite Index is like a curse, and it has never been able to get out of the continuous market.

When the bulls began to despair, the bears began to take the opportunity to suppress the brokerage firms, causing the index to fall, thereby disrupting the bulls' plans.

Another factor that has had an impact on the market is the long-standing issue of capital allocation. Rendong Holdings’ stock price limit dropped to 13, and liquidation was undoubtedly the culprit.

The capital allocation boss behind the rumors was controlled by the police and was implicated in a series of underlying collapses.

Talking about capital allocation, it originated from the 2015 stock market crash and was an important "accomplice" at that time. Because management did not know enough about derivatives, a large number of high-frequency quantitative transactions and over-the-counter capital allocation disrupted the A-share bull market.

In the end, due to governance and capital allocation, A-shares went into a bear market for four years.

But since last year, the market has picked up, and capital allocation has also picked up.

Rendong Holdings may have used excessive OTC leverage this time (as of Friday, there were still 190 million shares sold, which may include a large amount of capital allocation), and the impact was relatively large.

But I think that in terms of the current scale of capital allocation, it is not the same as in 2015; compared with the current 100-billion-level public offering, sunshine private equity, and QFII, it is only a drop in the bucket.

Therefore, the impact of capital allocation on A-shares will not change the pace of the bull market. At most, it will have a certain impact on short-term trading investment behavior.

For institutions, this is just an opportunity that can be exploited to let those investors who are not convinced about the bull market leave the market, let short-term customers leave the market, and give new funds an opportunity to build positions.

Therefore, for companies with good fundamentals and high industry prosperity, it is indeed an opportunity to buy at low prices.

In fact, in a market where information transparency is getting higher and higher, transactions are becoming more and more difficult. The gap between institutions and retail investors is more about emotional control.

Especially leveraged funds, because of their poor risk tolerance, will cause emotional loss if there is any trouble.

Institutional funds are large and have complete risk control systems, so they are relatively unaffected by short-term emotions.

Therefore, this Rendong Holdings incident should also make everyone remain in awe of capital allocation again. There is nothing wrong with wanting to make quick money, but you have to see if you can withstand the impact of the market.

The same 10% drop is a world of difference between investors without leverage and investors with 10 times leverage.

The biggest factor that affects trading is our emotions. If we say that greed and fear are the weaknesses of human nature, no one can eliminate them.

So when you use leverage, you will undoubtedly amplify greed and fear exponentially, which is against the laws of nature.

The market itself has not undergone substantial changes. China is still the best country in epidemic prevention and control in the world. The economy is recovering. The stock market, which is a barometer of the market, has only encountered short-term difficulties.

I believe that once the dark clouds pass, the sun will shine brightly.