To put it bluntly.

Harvesting leeks, shearing sheep, it has been over three years.

In July 2021, the turnover of the Shanghai Stock Exchange alone was over 700 billion.

By July 2024, the total turnover of the two markets plus the Beijing Stock Exchange was less than 700 billion.

A while ago, the turnover even fell to over 500 billion.

The extreme reduction in volume implies that after the existing game, the leeks are being sheared so much that they are about to be pulled up by the roots.

The reason for the reduction in volume in the market is mainly due to the lack of liquidity of funds.

This is the biggest attribution.

But why is there a lack of liquidity, where did the funds go?

Advertisement

This needs to be looked at from two aspects.The first aspect is the withdrawal of funds.

To be honest, the amount of money that has been withdrawn from the market in the past two years is actually quite a lot.

Including myself, after the end of the big bull market in 2021, I withdrew half of my funds.

The reason for the withdrawal is actually very simple. After a bull market ends, there should be at least a 2-3 year period of recuperation.

Funds withdrawn above 3700 points will basically not return to the market above 3000 points.

Most of the funds' predictions for the big cycle, including the position of the warehouse, are all starting from 20%.

And from 3700 to 2635, the overall decline is close to 30%, which is also in line with the minimum decline of the normal bull and bear cycle.

Without a certain space, how can big money return to the market?

Therefore, the funds that cashed out at high positions have already moved the money to do other things. They have not returned to the market in the past 2-3 years and have not participated in the market.

These funds are not not returning, when the time comes and the space comes, they will return to the market to make a profit again.In the second aspect, the passive side has been laid flat.

A portion of the capital is deeply trapped.

Many retail investors, including fund holders, have long been lying flat.

This part of the capital has certainly lost the desire to trade, lying motionless on the floor, quiet and peaceful.

As long as the loss exceeds 20%, the willingness to cut losses will sharply decline, let alone some 30%, 40%, or even more.

Some stocks have fallen by 80% from the peak in 2021, and the capital has long given up on salvation.

On the way down, there may still be a willingness to reposition, but the more you reposition, the more you lose, and then you dare not reposition again.

In addition to investors who like to do short-term trading and are still tirelessly working, those funds that can be long or short have already rarely traded.

There is also a part of the retail investors who are trapped every time they buy, and finally choose to leave the market.

In the past two years, although the proportion of account cancellation is not high, it is not small, and the capital is still mainly outflowing.The reason for the market's contraction has been identified, but this contraction has not yet reached its extreme.

Compared to the bottom of previous bear markets, the market's contraction is far more severe than it is now.

At present, there is still an activity level of 500-600 billion, and the contribution of quantitative analysis is very significant.

Quantitative analysis itself does not have a pattern of bullish or bearish, it is just a strategy for programmatic trading.

Quantitative analysis has not been banned because it can provide liquidity to the market.

However, this liquidity is based on the elimination of others' liquidity.

It's like having an additional dealer at the gambling table, who always bets but is likely to win a small part of the money each time.

After accumulating small amounts, the gamblers who bet against him naturally become fewer and fewer.

Now, it is very likely that various forms of quantitative analysis have already started to compete with each other in the market.

In simple terms, different strategies are playing against each other until one side wins, or the market converges, which is when the real extreme contraction occurs.This process may be the endpoint of the market's tail-end volume contraction.

It must be mentioned that there is another point, which is that quantitative trading can also be taken advantage of.

The ones who can take advantage of them are a certain team, a team with unlimited ammunition.

When the quantitative trading is taken advantage of to the point of being bare, the market's extreme volume contraction is naturally completed.

Some people will definitely ask, how much will this extreme volume contraction shrink to.

There is no way to accurately judge this, but from the current situation, it is likely to be below 500 billion.

In 2023, the extreme volume contraction to just over 600 billion, many people thought it was a super low volume.

In 2024, it was refreshed, directly to 57 billion.

And this 57 billion, is not even at the most pessimistic point in the market, near 3000 points.If the market maintains a bearish trend with a slow decline, once it falls to around 2800, 2700 points, the trading volume will further contract.

Where have the panic sells gone?

Some people are still puzzled by this, wondering why there are no panic sells.

Panic sells only occur under two circumstances.

The first scenario is a short-term sharp drop, causing panic among short-term traders.

A sharp drop in short-term trading can easily lead to panic selling.

Especially when hot sectors suddenly encounter a significant bearish candlestick, panic sells are at their peak.

Short-term selling targeting hot spots, as well as large-cap blue-chip stocks, can trigger panic.

For stocks with dense trading volumes, if a sharp drop occurs, panic sells are likely to emerge.

However, this actually does not happen very often in the late stages of a bear market.Because the main force itself is not very willing to lose chips, and the intention to smash the market is not strong.

The possibility of using bad news to smash the market is relatively high. If there is no bad news, there would be no such panic.

The second type is a continuous decline, and leverage traders panic.

This kind of panic is the panic of blowing up the position, which is actually irrelevant to the emotional aspect.

There are quite a few cases of blowing up positions, and the last stubbornness of the financing plate is completely killed.

Especially for some small tickets with not very good fundamentals, they will be forcibly killed until the financing plate comes out.

But after the financing plate is all killed, no matter how much it falls, there is no panic, no chips.

Because it has fallen to the point where there is no passive selling, everyone is deeply trapped, and there is no panic, it is all a zombie plate.

Volume reduction itself is a normal reaction at the end of the trend, and not reducing volume is against human nature.

How can the stock price increase when it falls to the bottom, where does the disagreement come from?As the saying goes, the ultimate reduction in volume is when the market moves from disagreement to ultimate unity.

Once the market reaches a point of unity again, where there is no selling pressure, the real reversal will come.

Therefore, the reason for the reduction in volume is ultimately the rebalancing process of supply and demand between buyers and sellers.

This process is very long, and there will be continuous price games in the middle.

How long this game time period is, in fact, is not easy to estimate.

Finally, let's talk about a question that many people care about. From the perspective of volume, how long will it take for the market to hit bottom?

Under the current situation, the market is at least several months away from hitting bottom.

Because the current market, although the volume is not large, more than 60 billion, but there is no intention of lying flat with reduced volume.

The market is still rolling in the sea, rotating, and the major sectors are still constantly flapping.

Among them, some are funds entering the market, collecting chips, and some are funds that are still rolling over for profit.The market's convergence has not yet fully manifested, the volume contraction has not reached its extreme, and it will still take time to reach the true bottom.