Focus on individual stocks, not the index!

Overnight, U.S. stocks saw a slight pullback, with the Nasdaq finally taking a breather after 13 consecutive days of gains, closing down 0.26%. The Golden Dragon Index of Chinese stocks also dipped by 0.32%, but the FTSE China A50 closed up 0.30%, somewhat saving face for the A-share market.

Gold and silver saw little movement, while Brent crude surged nearly 4%, trending upward with volatility. Trump once again stated that "a deal can definitely be reached," sending Japanese and Korean stock markets soaring at the open, with the KOSPI jumping 2% in early trading. The overall sentiment is relatively friendly for the A-share market today.

Yesterday's A-share market was a broad-based rally, with 3,425 companies closing higher. The median stock gain was 0.48%, and the profit-making effect was in full swing. Trading volume surged to 2.58 trillion yuan, the highest since this rebound began. Clearly, sidelined funds, which had been waiting, have started entering the market to snap up shares.

Let me share a pattern: Over the past year or so, whenever the market's trading volume touches 2.5 trillion yuan, it's almost always followed by a short-squeeze rally, typically peaking and diverging around the 3 trillion yuan mark. So, there's a high probability of an acceleration phase ahead. It won't be a mindless surge in the indices; it's the same old playbook—blue-chips stabilizing the market while thematic sectors rotate and drive gains. Yesterday, commercial spaceflight made a strong comeback, with several core leading stocks hitting the daily limit-up. This is a clear signal of capital moving in.

The market now clearly shows a "high-to-low rotation": the ChiNext is taking a breather while the Shanghai Composite starts to catch up. Money flowing out of high-valuation sectors is moving into lower-valuation ones, though the intensity hasn't fully picked up yet.

Furthermore, the earnings season is almost over. The high-valuation stocks that funds were previously crowded into are becoming less and less attractive in terms of value for money, and it's time for that party to end. If you missed that crowded trade, don't panic. Don't get carried away and chase highs. The stocks you're holding that haven't moved might actually offer more upside later.

Morgan Stanley just released a report, suggesting A-share indices could rise about 5%-10% in 2026. Based on that, the Shanghai Composite's annual high would be around 4200-4400 points, and the ChiNext could even break through its 2015 historical high of 4037 points.

Personally, I think it's indeed a bull market now, but this year's market has been too extreme. Sector divergence is outrageous: Hardware & Equipment is up 21.6%, ranking first, followed by Semiconductors and Non-ferrous Metals, each up about 16%. In contrast, Consumer Discretionary & Retail is down 14%, and Non-bank Financials are down 11.48%. So, stop asking if the bull market is still here. If you're in the right sectors, it's a bull market. If you stubbornly hold onto domestic demand and recovery themes, it's basically been a bear market for you this year.

To make big money in A-shares, you can only do so by catching the major trend and aligning with the main theme. The major trend refers to the era's tailwinds, national policies, and industry sectors. If you haven't made money recently, don't overthink it—you simply picked the wrong direction. Don't worry about whether there will be a bubble later; at least for now, being in the wrong direction is just wrong. If you've made money, don't get cocky, and certainly don't mock veteran investors who missed the rhythm. Fortunes change. The way you're making money now is likely the way you'll give it back later. That's just how it is.

Now, let's look at the sectors and themes:

1. Commercial Spaceflight
No one paid attention to it before, but now it's out of reach. Last week, when everyone was focused on computing power, I kept saying this sector was highly likely to absorb funds flowing out of the computing power divergence. I mentioned it for almost a week, and it exploded yesterday.

The positive news catalysts are already well-known, so I won't elaborate. Let's talk about the core logic: The strong performers in April, like optical communication and lithium batteries, relied on earnings certainty. With uncertainty in the U.S.-Iran situation, funds favored stocks with stable earnings. But once the earnings season is over, funds stop focusing on earnings and instead look for sectors with multiple catalysts and compelling stories. Commercial spaceflight is the one with the highest probability. That's the real logic behind its rise.

The sector went parabolic yesterday, and there will definitely be a lot of hype following it. If you missed the boat, don't rush to chase. I'm still bullish on the trend, but opportunities will come during pullbacks and consolidation. Jumping in now is a good way to get stuck holding the bag.

2. Computing Power
After consecutive surges last week, it started to weaken yesterday. I warned about this rhythm last week, so don't panic. The previously crowded high-valuation core stocks have clearly cooled down, with no more positive earnings surprises after results were released.

However, some hardware sub-sectors that haven't risen much, like PCBs, liquid cooling, and copper foil, are still worth watching. Also, domestic computing power has seen divergence for two consecutive days, with limited pullbacks. It's worth keeping a close eye on once it stabilizes.