After the sharp rise in the past week, the 14-day RSI index of Wind All A hit a high of 80.57 points.

Although I don't often use indicators in technical analysis, I have a particular fondness for RSI, especially unconventional interval analysis.

In 2015, I wrote an article titled "The RSI Bull and Bear Discrimination Method Treasured for 10 Years, Unknown to 99% of People," introducing this idea. The idea is actually not complicated; it believes that in bull and bear markets, the operating range of RSI is different. In a bull market, it is generally between 40 and 70 points (and higher), while in a bear market, it is generally between 30 points (and lower) and 60 points.

So when the RSI of an index, especially a broad-based index, breaks through 70 points, it often indicates that it may have entered a bull market range. And this time, RSI has entered an even higher range of 80 points? What does this mean?

Although history is not simply repeated, reviewing history and learning from it is always meaningful.

Looking at the historically representative Wind All A index, which has been around since 2000, there have not been many years with daily RSI greater than 80 points. If we don't count this year, 2024, it would be 2000, 2006, 2007, 2009, 2014, 2015, 2019, and 2020.

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Investors familiar with A-shares should also see that these are historically famous years of bull markets.

Here, I will draw the trend of Wind All A and the RSI index for each year, and mark the dates when RSI is greater than 80 with vertical shadow lines. Let's review each year one by one.

2000

In February 2000, Wind All A had an RSI greater than 80 points, which marked the beginning of a continuous rise. Of course, there was a sharp drop in the middle, and RSI fell slightly below 40 points before quickly recovering. There was another one in August, followed by a new high for Wind All A in November, but RSI failed to break through 80, showing a divergence pattern at the top. The subsequent history saw Wind All A reach a slightly new high again, accompanied by a divergence pattern at the top of RSI. Under the triple divergence pattern, the grand bear market of 2001-2005 began.2006

In 2006, the largest bull market in the history of A-shares to date began. In February 2006, the Wind All-A index experienced an RSI (Relative Strength Index) greater than 80 for the first time. Looking back, this was a test, followed by a horizontal adjustment, with the RSI stabilizing at 40 points before rebounding, leading to two waves of increases in April and May, accompanied by two RSI readings greater than 80 points. By December, another wave of RSI greater than 80 points appeared. Of course, seasoned investors know that this was just the beginning of the bull market.

2007

2007 was the craziest year for A-shares, especially in terms of RSI. In January, April, and May, there was a concentrated occurrence of RSI readings greater than 80, which led to the famous "midnight rooster crow" in A-share history, also known as the "5.30" crash. However, this crash, with the RSI adjustment, generally stopped around 40 points. In the second half of 2007, A-shares continued to rise, but the focus shifted from small and medium-sized stocks to large blue chips. Although the Wind All-A index was still hitting new highs, the RSI struggled to reach 80 points, showing a divergence at the top. The adjustment in October was even more significant, with the long-term RSI index adjusting below 40 points, signaling weakness. After that, everyone knows about the great bear market of 2008.

2009

Thanks to the "four trillion" stimulus, after the crash in 2008, A-shares welcomed a rebound in 2009. In February 2009, the 14-day RSI index of Wind All-A touched 80 points again. This 80-point RSI quickly triggered a pullback, but the pullback ended just above 40 points on the RSI, and then a truly grand rebound began. This is reflected in the chart with a dense appearance of RSI greater than 80 in July.In November, the Wind All A Index reached a slight new high, but the RSI failed to exceed 80 points, indicating a divergence at the top, which then led to an adjustment that did not stop until July of the following year.

2014

Time flies, and after several years of fluctuation, the A-share market only ushered in a new bull market in 2014.

Upon closer examination of the trend that year, it had already shown an RSI approaching 80 in August, signaling the beginning of the bull market. By the end of November, with the frantic rise of large-cap stocks, especially in the securities and insurance sectors, the RSI finally touched 80 points, officially opening the prelude to the bull market.

2015

The sharp rise at the end of 2014, though sudden and rapid, was not achieved in one fell swoop.

In the first month or so of 2015, the Wind All A Index was consolidating horizontally, with the RSI falling in sync to the area above 40 points, before the second super crazy bull market began. Many veteran investors still remember this vividly to this day. By June, the Wind All A Index reached a new high, but the RSI failed to reach a new high, resulting in a divergence at the top, which was followed by the "liquidity crisis" caused by deleveraging.

2019

In 2019, the A-share market experienced another bull market. It began with a rapid rise in March. Subsequently, in April, a new high was reached, but the RSI failed to break through 80, leading to a divergence at the top. Therefore, for more than half a year that followed, the A-share market was consolidating horizontally.

2020In 2020, the pandemic emerged, triggering global quantitative easing and igniting a frenzy for core assets. In July of that year, there was a trend where the RSI of the Wind All-A Index exceeded 80.

In 2024,

Once again, the Wind All-A Index has shown a trend where the RSI exceeds 80 points.

What about the future?

Looking back at the trend from 2000 to the present, the Wind All-A Index's RSI exceeding 80 points, as a signal indicating the start of a "bull market," has not failed yet.

By the way, here is a chart of the 3-year rolling returns of the Wind Equity-Biased Mixed Fund Index. Although the low point of this wave is slightly lower than historical levels, it still appears to be forming a double bottom, generally in line with my expectations in my October 2022 article "If the Bear Market Lasts for More Than a Year?" and my September 2023 article "Has the Equity-Biased Fund Index Bottomed Out?"

If history repeats itself, perhaps we can look forward to the unfolding of a new bull market.

Of course, if there is a bull market, how it unfolds is a question.

One possibility is a rapid surge like at the end of 2014 and the beginning of 2019, making it impossible to catch up.

Another possibility is a more measured approach, similar to the early stages of 2006 and 2009, where after the first touch of 80 points, the market pulls back, stabilizes around an RSI of 40, and then begins a second, truly breathtaking rise.Personally, I still hope that the A-share market can follow the latter path this time, laying a solid foundation and rising slowly. If it continues to experience sharp rises and falls, it would be akin to the story of "The Boy Who Cried Wolf," repeatedly deceiving stock and fund investors, and gradually eroding confidence in the capital market, eventually leading to a vicious cycle.

For the A-share market, it is not only about having a bull market, but more importantly, having a slow and steady bull market. Taking one step at a time, moving slowly and solidly, is the better approach.