Thin-volume rally: breakout tomorrow?

Under the boost of bullish headlines, the mainland indexes gapped higher at the open and never looked back, finishing the day with a powerful gain. The good news: breadth was positive for a second straight session, as if spring had arrived and every flower were blooming at once. The bad news: trading volume failed to expand again. If turnover cannot pick up, even a push past the 3,936 resistance is likely to be met by a pullback. Still, once that level is cleared, the “double-top” scenario disappears and the odds of a later slide below 3,800 drop sharply. The bigger trend therefore remains friendly, rising like the morning sun.

On the board, stocks were up across the spectrum. Leading the pack were lab-grown diamonds, shale gas, combustible ice, CPO concepts, geothermal energy, marine economy and memory chips. Laggards included liquor, seeds and generic drugs. Nearly a hundred counters hit the daily limit-up, only two the limit-down, while the benchmark leapt more than 3%, stronger than the main-board average.

Both Hong Kong and A-shares surged today, choreographed once again by that tireless “old artist” who is still negotiating the betrothal gift and whose “family inspection” is scheduled for next spring. The veteran never seems to tire, determined to occupy centre-stage every minute, directing his own tragic-comic opera in the capital markets.

The “little Tengs” exploded higher: Yizhongtian (the “XYZ” trio), Foxconn Industrial Internet, Shenghong, etc. all ranked at the top of the net-buy list. The message is clear: until a new leadership theme sprouts, money keeps tilling the same familiar furrows. A-shares are following the footsteps of Wall Street, where Apple, NVIDIA and Microsoft have led the dance. The difference: the US market chases earnings, while A-share investors still love a good story. In the end, reality wins; every tale must pass the profit test. So the real key is technological breakthrough—once that arrives, earnings will follow.

Shale-gas and combustible-ice plays were strong today: Shenkai, Sinopec Machinery, Deshi Drilling and peers all spiked. China’s gas output has jumped from 30 bcm in 2000 to 240 bcm in 2024, ranking fourth globally. Coal-measured gas could become the next “blue ocean” once coal-bed methane hits bottlenecks. With winter approaching and coal/gas already up, today’s rotation into shale names shows the sector wheel is still turning normally. The only losers were coal and conventional gas—after a long rally, a pause is natural. “Buy coal in winter, power in summer.” Winter has yet to bite, so the theme isn’t dead, but chasing here is risky.

We wrote yesterday that the first half of the week looked safe; the test comes in the second half. Today’s thin-volume rebound lifted the index back above 3,900, only a whisker from the prior 3,936 high. One gap-up tomorrow should take care of that. The index may be whole again—have your portfolios recovered as well? As long as the market stays stable, the laggards still have their day in the sun.