Objectively speaking, the market index, especially with 16 consecutive up days, has broken through the previous high of 4034 points, exceeding our expectations for the year-end market.
First question: Why the consecutive up days? After the market's 8 consecutive up days, we explained in our weekly report &#34;Eight Immortals Crossing the Sea&#34; that there is a certain amount of incremental capital, but more importantly, the current market generally believes that there is upward space for the market index in 2026. In late December, with the year-end pricing environment being relatively good, various funds began to rush to price in different directions. This self-fulfilling bullish expectation has created this round of &#34;atypical&#34; spring frenzy.
Second question: What happens after the consecutive up days? Based on historical statistics, a 5% increase during the year-end period can be driven by sentiment (roughly near the previous high), while a 5-10% increase can be driven by incremental capital. Since the low point in mid-December last year, the market index has exceeded a 7% return, breaking through the strong oscillation framework we previously envisioned (3800-4050). Here, we still believe that the previous two predictive frameworks were not wrong: 1. Currently, to stabilize above 4000 points and continue upward, a transition from liquidity bull to fundamental bull is needed; 2. A major year-end market rally exceeding 10% requires a rise logic, and &#34;where is the logic?&#34; is the question that needs to be directly addressed for the market to continue exceeding expectations before the Spring Festival.
Third question: What comes next? At the structural level, the most core feature during this period is &#34;Eight Immortals Crossing the Sea,&#34; with indices like the CSI 500, National Index 2000, and CSI 1000 significantly outperforming the market style. We tend to believe that the transition from the Eight Immortals Crossing the Sea to the Four Great Kings is based on funds and sentiment, and this structural contraction is the key to &#34;what comes next.&#34;
Combining our outlook for 2026, the Four Great Kings essentially represent &#34;new and old dancing together,&#34; core principles following &#34;AI technology moving downstream, exports moving upstream.&#34; Among them, when significant downstream applications of AI in 2026 are viewed as a technological reversal in pricing, according to the four stages of technology industry investment, this time the second stage of computing power and the third stage of AI semiconductors will shift to significantly increasing positions in the fourth stage, which is the supply-demand gap in the industrial chain process from 1 to 100 (AI application marketing, humanoid robots, intelligent driving, consumer electronics, power equipment storage, and copper, etc.); &#34;old&#34; refers to an increasing number of traditional industries breaking away from old models and achieving profit stabilization and growth through new momentum brought by moving towards high-end technology manufacturing or enhancing overseas business. Facing 2026, this positive transformation will gain Beta pricing in the mid-to-upstream fields, corresponding to finding engineering machinery in 2025 as the best investment logic, aligning with our repeated emphasis since Q4 on going overseas + global pricing of resource products (including non-ferrous metals (precious and industrial metals), chemicals, engineering machinery, power equipment, building materials, etc.).
Last week, the Shanghai Composite Index rose by 3.82%, the CSI 300 rose by 2.79%, the CSI 500 rose by 7.92%, and the ChiNext Index rose by 3.89%. The growth style outperformed the value style, with small-cap stocks leading the gains. Last week, the average daily trading volume of the entire A-share market was 28.429 billion, a significant increase compared to the previous week
Since the market began to rebound in mid-December, the Shanghai Composite Index has achieved a record &#34;16 consecutive up days&#34; and has broken through 4100 points, reaching a nearly ten-year high. Objectively speaking, this wave of the market index, especially the continuous up days, has exceeded our expectations for the year-end market.
Previously, our basic inference for the year-end market was: the valuation percentile of the market index was already at an absolute high, and without significant marginal improvements in policy, fundamentals, and liquidity, an upward swing of about 5% in the market index roughly corresponds to the previous high of 4034 points, making it reasonable to maintain a strong oscillation framework after November. Clearly, since the low point in mid-December last year, the market index has exceeded a 7% return, breaking through the previous strong oscillation framework.
Here, we still believe that the previous two predictive frameworks were not wrong: 1. A bull market purely based on liquidity began to fade gradually after the market index broke through 4000 points; currently, to stabilize above 4000 points and continue upward requires a transition from a liquidity-driven bull market to a fundamentals-driven bull market; 2. Based on historical statistics, a 5% increase during the year-end period can rise due to sentiment, a 5-10% increase can rise due to incremental funds, but a large-scale increase of over 10% requires a rise logic. &#34;Where is the logic?&#34; is the question that needs to be directly addressed for the market to continue exceeding expectations before the Spring Festival.
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So, why is the market showing continuous up days and starting 2026 with such a strong form? After the market's 8 consecutive up days, we explained in our weekly report &#34;Eight Immortals Cross the Sea&#34; that there is a certain amount of incremental funds, but this is a secondary factor; the most important thing is that the current market generally believes there is upward space for the market in 2026. After alleviating disturbances such as the Federal Reserve's interest rate cuts and the yen's interest rate hikes, in the overall decent pricing environment for the year-end in late December, various funds are racing to price in different directions.
This self-fulfilling bullish expectation has created this round of &#34;atypical&#34; spring excitement, but we also want to remind that the recent &#34;let's rise first and talk later&#34; mentality, while a positive test for a slow bull market, essentially represents a &#34;prepayment&#34; for future market conditions.
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At the structural level, we propose that the most core feature during this period is &#34;the Eight Immortals crossing the sea.&#34; Ultimately, the Eight Immortals crossing the sea based on funds and emotions needs to transition to the Four Great Kings. This structural contraction is based on the logic that will dominate in the future, so we believe that &#34;the Eight Immortals crossing the sea&#34; is not the key to investment success in the first half of 2026, and we repeatedly emphasize that &#34;a bird in the hand is worth two in the bush.&#34; Specifically:
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It can be seen that in the year-end market, sectors surrounding technology (commercial aerospace, CPO, AI application marketing GEO) - resource products (precious metals and industrial metals) - pro-cyclical (chemicals, machinery, wind power) - finance (non-bank) take turns to showcase their strengths. From the perspective of core indices, small and medium-sized indices such as the CSI 500, National Index 2000, and CSI 1000 are significantly higher than the peak in November, with the equity mixed fund index's increase close to that of the Wind All A Index; the ChiNext Index and the CSI 300 have just returned to the November peak, while Hong Kong tech stocks are significantly below the November peak. In terms of industries, electronics, military industry, and non-ferrous metals have cumulatively pushed the Shanghai Composite Index up by 160 points, contributing to more than half of the increase since the low point in late December.
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At the same time, it can be seen that within the &#34;Eight Immortals crossing the sea,&#34; we can vaguely discern that funds are actively adjusting positions: 1. Quantitative funds and ETF funds are pouring into the strongest National Index 2000 and CSI 500 indices during this period; 2. Southbound funds have significantly weakened since November last year, with even outflows in December, while northbound funds have shown a certain increase in trading activity; 3. Bank stocks remain weak, while non-bank insurance is undergoing deep revaluation; 4. Within technology, the previously narrowed core industry trend is being appropriately expanded again, chasing downstream varieties such as commercial aerospace and AI applications; 5. Outbound + globally priced resource products (non-ferrous metals, chemicals, engineering machinery, power equipment) are experiencing stable and continuous inflows of funds.
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In light of our outlook for 2026, the &#34;Four Great Kings&#34; essentially represent a &#34;dance between the new and the old,&#34; with the core focus on the fundamental lines of technology + going overseas, following the basic principle of &#34;AI technology moving downstream, exports and overseas expansion moving upstream.&#34; We believe the structure will shift from &#34;the new surpasses the old&#34; in 2025 to &#34;the new and the old dance together&#34; in 2026. Among them:
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&#34;New&#34; refers to the significant breakthroughs in downstream applications of AI in 2026, which are seen as a reversal in technology pricing. According to the four stages of investment in the technology industry, at this point, the focus will shift from the second stage of computing power and the third stage of AI semiconductors to significantly increasing positions in the fourth stage, which involves the supply-demand gap in the industrial chain process from 1 to 100 (humanoid robots, intelligent driving, AI application marketing, consumer electronics, power equipment, and energy storage);
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&#34;Old&#34; refers to the increasing number of traditional industries breaking free from the constraints of old models and achieving profit stabilization and growth through new momentum brought about by aligning with high-end technology manufacturing or enhancing overseas business. This positive transformation towards 2026 will gain Beta pricing in the midstream and upstream sectors, corresponding to the best investment logic in engineering machinery for 2025, which aligns with our repeated emphasis since Q4 on going overseas + low-position cyclical (including globally priced resource products, non-ferrous metals (precious and industrial metals), chemicals, engineering machinery, power equipment, and building materials).
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Risk Warning and Disclaimer
The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk

The core logic of this round of bull market lies in the downward movement of AI technology and the upward movement of exports. The main index has broken through 4034 points, and the market is generally bullish, with expectations for upward space in the main index by 2026. Currently, attention should be paid to the transition of liquidity and fundamentals, as well as the logic of the year-end market rally. The small and mid-cap indices are performing strongly and will transition towards the four major pillars, emphasizing the co-dance of new and old industries, especially the breakthroughs in AI applications and the transformation of traditional industries

The core logic of this round of bull market: "AI technology moves downstream, while exports and overseas expansion move upstream."