Markets, Gold, Oil Tumble; Bull Run Resumes Next Week

The U.S. stock market and gold have finally begun to decline, especially gold, which has fallen nearly 10% since the election day, marking the largest monthly drop in nearly a decade. The path to gold's collapse has only just begun. The U.S. stock market is also no longer soaring and is starting to peak and correct. The decline of both gold and the stock market signals the end of one era and the beginning of another. Under the pressure of a strong dollar, the RMB has fallen consecutively for more than half a month, which has directly resulted in the market's correction.

On Friday, bolstered by the decline of the dollar and gold, the RMB began to regain its strength. This indicates that a turning point in the market is imminent next week. Additionally, with the expiration of stock index futures on Friday, this round of market adjustment will also come to an end.

It can be predicted that next week the market will begin to rise significantly again, continuing the second wave of the bull market toward the ten-thousand-point mark. I will now attempt to address the current confusion in the market, hoping to provide some assistance.

Advertisement

First, is this the shortest bull market in history? This viewpoint is purely sensationalist media seeking attention, a diversion designed to attract traffic. It is hardly worth debating. However, given the recent influx of new investors in the stock market, it is necessary to clarify. Is this bull market over? My answer is a definite no; it is far from over. There is still a long way to go, measured in years at the very least.

There is at least another two years of bull market ahead. It's absurd to claim that the bull market has ended after only two months. Corrections in a bull market are entirely normal. As the saying goes, bull markets often have abrupt declines. The force of this drop does not even reach the level of an abrupt decline. When the market reaches over 8,000 points next year, you will see what an abrupt decline truly looks like.

A drop of more than 5% in a single day is what we call an abrupt decline. Right now, even this slight dip seems alarming to those who have never experienced a major market event. Bull markets often have violent drops, as there are too many profit-takers, and a sharp decline is necessary to scare them off. We haven't even seen a 2% drop in one day yet. Currently, we are in the accumulation phase of the bull market; patience is required as we await the rise. Those with higher skills can switch between different sectors to avoid setbacks.

Second, this time there has been a massive volume of trading, and high volumes imply high prices, suggesting that the stock market has peaked. This viewpoint is currently quite mainstream and seems very plausible. The market has indeed experienced substantial trading volume over the past two months. The reason this volume appears intimidating is that everyone has just endured one of the larger bears in history.

Moreover, the switch between bull and bear markets has occurred quite suddenly, resulting in a strong psychological impact on everyone. Based on the current scale of the economy and total money supply, a trading volume of two to three trillion can only be considered normal for a bull market. Back in 2007, when our monetary supply was around fifty to sixty trillion, the stock market's transactions had already reached five to six hundred billion. During its peak, it was as high as eight to nine hundred billion. Now, our money supply is ten times that of those days, so what's two to three trillion in trading volume? It's not even sufficient to meet the entry-level of a bull market, and the trading volume for this bull market will eventually reach ten trillion late in its course.

So, don't be intimidated by this two to three trillion trading volume; it really doesn't amount to much. The reason people are fearful is that we have been trapped in a bear market for far too long.

Third, the current international situation is unfavorable, and the foundation for a major bull market is lacking. This viewpoint is also quite popular and is primarily driven by fear from a set of flashy arguments. In 2018, the trade war was initiated, and it caused significant harm to the Chinese people, with its shadow lingering to this day. Many people feel a chill at the mention of it, but I must point out that this is a different time now.

The situation between China and the U.S. has undergone a fundamental reversal. Even if Reagan or Washington were brought in, it would not alter the decline in America's fate. The three years of pandemic equated to a world war; during the early stages of the pandemic, China's position was akin to that of the U.S. during World War II – standing out and profiting tremendously.

The goal of launching a trade war was to drain China's foreign exchange reserves, leaving China without foreign currency to import food and strategic resources, ultimately leading to unrest. However, after a round of trade wars, not only did our foreign exchange reserves not diminish, they actually increased significantly.

Today, through currency swaps, we are lending surplus foreign currency to struggling countries and dispersing the dollar. Even now, launching a trade war serves merely as a bluffing chip in negotiations.