This week's stock market can be described as abysmal, with the three major A-share indices falling in unison. Particularly in the last trading session, it seemed as if the three major A-share indices were accelerating their decline, with the overall market sentiment being quite pessimistic and the bearish atmosphere very dense. The A-share market has indeed reached a critical juncture.

It can be observed that this week, the Shanghai Composite Index fell by 2.69%, closing at 2765 points, while the ChiNext Index fell by 2.68%, closing at 1538 points. The Shenzhen Component Index fell by 2.61% this week, closing at 8130 points.

All three major A-share indices closed lower this week, with the Shanghai Composite Index in particular showing a significant medium bearish candlestick on the weekly chart. Moreover, this pattern was formed on the weekly trend, which is quite damaging. Why is that?

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Because in the previous weeks, the Shanghai Composite Index had only shown small bearish or bullish patterns on the weekly charts. This week's drop has made the trend very unattractive. Judging by this trend, it is estimated that there may still be a continuation of the bearish trend.

More importantly, suddenly, two signals have materialized, and these two signals will have a certain negative impact on the A-share market going forward. Does this mean that the stock market is about to experience turbulence next week?

The first signal is that the European and American stock markets have started to decline collectively again. The indices of the European stock markets are mostly down, and after the U.S. stock market opened, the declines were also significant, with the Nasdaq Index falling by 2.55%.

What does this mean for A-shares?

This implies that A-shares are likely to be influenced by the contagion effect next week. A-shares have a history of following declines rather than rises, and this is happening in the context of such a significant drop in the U.S. stock market. Therefore, the outlook for the Asia-Pacific stock markets next week is likely to be pessimistic.

However, in the author's view, perhaps for A-shares, there is indeed an impact at the opening, and this impact is limited to the opening. This is because, in the past, when the U.S. stock market has plummeted, it has often been observed that A-shares open low and then rise.

Therefore, it is correct to maintain a certain level of concern, but there is no need to be overly pessimistic.To put it bluntly, the Shanghai Composite Index has now plummeted to a level of 2765 points. It cannot be said that this level is already very low, but currently, the index's trailing price-to-earnings (P/E) ratio is a mere 12 times, which is already close to historical lows.

More crucially, the banking sector, which was previously undervalued, has seen its valuation rise after this year's surge. At this juncture, the P/E ratio of the Shanghai Composite Index remains so low, which is indeed hard to justify.

The second signal is that the market is essentially devoid of volume. There was a day of high volume, but it was just a single trading day, and then the volume began to contract again. In fact, individual volume is insignificant; what matters in the market is the accumulation of volume.

Currently, the daily turnover of the Shanghai and Shenzhen stock markets is around 500 billion yuan, which is quite low. Such a depressed trading volume indicates that the entire market is in a very gloomy atmosphere. How can a recovery trend be brewed under such circumstances?

Therefore, in my view, based on these two signals, the stock market is likely to remain sluggish next week, especially with the bearish candlestick on the weekly chart, which has disrupted the previously calm situation. This is a concern for me.

In summary, caution is still necessary at present, and one should not be too reckless. The overall risk in the market is still too high. The bottom has not yet solidified and continues to set new phase lows, and even a normal consolidation pattern has not yet emerged, so there are still variables at play.

The stock market is also likely to pick up volatility next week.