Rebirth of the Capital Legend

Chapter 268 The temporary victory of the bears!
Humphrey did not believe the data provided by Frederick. After all, the main hedge fund product "Aberdeen Asset Evolution No. 1" was currently in the main position of the market short position. It was not surprising that it deliberately released any bearish remarks and data.

"With your market intelligence collection and research and analysis capabilities at BlackRock, I believe you will soon realize that the current pound exchange rate market is a huge bull trap market," Frederick said. "I also hope that my friends can stand on the same front with me, just like we fought side by side in the Swiss franc black swan incident, to reap the huge profits in this round of market."

"Yes." Humphrey nodded and replied, "Thank you Mr. Frederick for your kind reminder."

After they finished talking about the transaction, they chatted for a while about life before hanging up the phone.

After hanging up the phone...

Humphrey pondered it carefully for a while, and the more he thought about it, the more he felt something was wrong, so he immediately called the head of the market research department and forwarded the data file that Frederick had sent him to the other party, asking him to verify it as soon as possible within a day or two.

After doing this, he thought about it carefully again.

Ultimately, we made an immediate reduction in some profitable long positions, reducing the weight of long positions in the British pound in the fund's holdings.

Just as Humphrey was influenced by his old friend Frederick.

It is time to start taking profits and reducing positions, and covering the long positions in the pound.

The foreign exchange investment and trading department of Citibank, a world-renowned investment bank, is also located on Wall Street in New York, USA.

Foreign exchange investment and trading manager Enoch stared at the fluctuations in the pound sterling exchange rate. After listening to the analysis report and market information report from the head of the market research department, his brows furrowed visibly. He smelled a hint that the tension between bulls and bears in the pound sterling exchange rate market was growing, and that extreme market trends were becoming more and more obvious.

"Edmund, what did you say?"

Enoch came to his senses and did not hear clearly what Edmund had just reported, so he asked again.

Edmund responded: "According to the data we have compiled, at this stage, the number of long and short positions established by investors through the multiple foreign exchange investment fund products managed by our institution still shows a large net long situation, which shows that market investors are generally still bullish on the pound exchange rate."

Enoch nodded slightly, then asked, "What about market news?"

Edmund responded: "The Bank of England's attitude remains unchanged, and they are still conducting new market operations to further stabilize the pound exchange rate. The British government is preparing intensively for the referendum on Brexit on the 23rd. Among them, the vast majority of government members do not support Brexit and believe that the vote for Brexit is unlikely to exceed 50%."

"What else?" Enoch continued to ask.

Edmund thought for a moment and then replied, "Also, the main short-selling institutions trapped in the market are making a strong counterattack. In particular, there are some reports about Mr. Frederick, the star fund manager of Aberdeen Asset Management, who is firmly bearish on the pound exchange rate. There are also heated online discussions about a young man named Su Yi from Huayi Capital openly issuing a challenge to global long capital."

"What do people say in online discussions?" Enoch asked.

Edmund responded: "For Huayi Capital, an institution with a very average capital volume, and this ignorant young man Su Yi who has been jumping around a lot recently, most investors and speculators on the Internet are mocking them. They all think that a small institution like Huayi Capital is simply impossible to cause a big fluctuation in the pound exchange rate market, let alone get away with a large loss."

"This organization called Huayi Capital, whose main hedge fund product is Huayi Chengyuan No. 1..." Enoch thought about it carefully and continued, "It seems that they have also established a lot of short positions on our Citibank foreign exchange trading platform, right?"

Edmund nodded and said, "Not a few, but a lot. Moreover, through our testing, we found that this guy not only did not reduce his short positions, but even when many of his related trading accounts had continued to suffer large losses, he was still increasing his short positions on the British pound exchange rate."

"Still increasing short positions?" Enoch was slightly stunned, then he chuckled and said, "It seems that Mr. Su is a resolute bearish investor, and also a very courageous gambler."

"Do we need to focus on monitoring the trading account opened by Huayi Capital on our trading platform?" Edmund said, "After all, if the main short-selling fund in this market goes bankrupt, it will still have a relatively large impact on our institution, and it will also have a relatively bad impact on other main lines in the market."

Enoch thought for a moment and said, "No need. Mr. Su from Huayi Capital is a smart man. Monitoring the dynamic position changes of the fund products he manages is not very useful for us. On the contrary, Huayin International's entry into the short-selling market and its public support for Huayi Capital's short-selling are worthy of our vigilance!"

"Huayin International?" Edmund smiled and said, "The cash flow in this institution's hands is indeed huge, but in terms of investment transactions in the foreign exchange market, this institution seems to have never made money and left the market. Every time it intervenes in the foreign exchange market, it is basically forced by various institutions to stop losses and cover its losses. This time... Judging from the situation, there is a high probability that there will be no accidents."

"You think so?" Enoch looked at Edmund with a smile and said, "I don't think so!"

When Edmund heard what Enoch said, he was slightly stunned and asked hurriedly: "From what Mr. Enoch said, are you bearish on the recent performance of the pound sterling exchange rate?"

Enoch responded: "Whether to be bearish or bullish has not yet been determined, but at this moment in the market, there is still a net long position of nearly one million lots, which is still frightening and unsettling!"

"I don't think this is strange," said Edmund. "Recently, the pound exchange rate has been rising rapidly. There is relatively little capital actively shorting, and there is also little long position covering. As a result, the long and short net positions in the pound exchange rate market are expanding, and the long and short patterns are becoming more and more unbalanced. I think this is completely understandable, and I think this is another reflection of the strong bull market."

"It's not that simple." Enoch said based on his intuition from many years of trading. "No matter what time, the market will not let the majority of people who stand on the side of consistent expectations make money. Moreover, in the history of finance, expectations that are too consistent have rarely been realized."

"Mr. Enoch means..." Edmund was slightly surprised and said, "You think the pound exchange rate market will not necessarily develop in a consistent bullish direction in the future?"

Enoch pondered for a while and did not answer directly. Instead, he asked, "How do you think the nearly one million net long positions in the market will choose to exit?"

"Of course." Edmund responded, "After defeating the main short sellers, they quickly set up hedging orders and left the market while the main short sellers were forced to cover their positions!" "What if the main short sellers in the market are determined to hold on until June 6rd and reveal their final trump card?" Enoch smiled and said, "Do you think that the market has already made some profits, and among the investors with such a large long position, how many people can bear to hold on to the floating profits and follow the main short sellers to make the last bet?"

"According to trading logic, I'm afraid that many people will take advantage of the expected assist to exit the market and take profits before the mystery of the referendum result on June 6 is revealed." Edmund responded, "The mystery of the referendum result, given the current long and short situation in the pound exchange rate market, may be a huge opportunity for the main short sellers in the market to reverse the market trend, but it may not be that important for many profitable long position holders in the market."

Enoch nodded slightly and said, "You are right, so... when the market's net long position has increased so much, the market's upward momentum has not only not increased, but is weakening. At this time... as long as the market releases a little bit of bad news, the pound exchange rate will dive quickly.

This is also the case with several major short-selling institutions, including Aberdeen Asset Management, Huayin International, and Huayi Capital.

It is clear that most of the news released to the market were unconfirmed false news, but this suddenly led to the underlying logic and fundamental reason for the pound sterling exchange rate to plunge by more than 100 points.

From a simple trading logic analysis, the profit and loss ratio of short selling at this time is much higher than that of long selling!

Also, I carefully looked at the market information released by several major short-selling institutions in the market today, as well as the short-selling analysis reports.

I feel that the views expressed by these institutions are not without reason.

In the current market, everyone says that the result of the referendum on the 23rd is definitely the expected "no Brexit" result, but have any unexpected situations occurred?

If we regard the referendum result as a probability math problem.

So, there is no doubt that the probability of the referendum result of Brexit and not Brexit is actually the same."

After listening to Enoch's analysis, Edmund, who was originally full of confidence, was suddenly shocked and responded quickly: "It seems that the 'Huayi Capital' institution, the 'Aberdeen Asset Evolution No. 1' main hedge fund, and several other major short-selling institutions in the market, are not simply gambling when choosing to short!"

Enoch smiled and said, "No matter how bold a gambler is, he can't bet hundreds of millions or billions of dollars at once. A careful analysis shows that at this stage, the logic of shorting the pound exchange rate is actually better than the logic of going long on the pound exchange rate."

"So Mr. Enoch has decided to short sell?" Edmund asked.

Enoch responded: "In the pound exchange rate market, there are such huge long and short positions. Everyone knows that there will be extreme market conditions here. Now that the success rate of short selling is higher, and our institution also needs to hedge the net long position of our proprietary fund products by establishing short positions, why not follow the short selling and try to seize the high probability of huge profits in the market?"

After saying this, Enoch did not wait for Edmund to respond.

He turned around and began to instruct the foreign exchange investment fund managers and trading managers in the fund trading department he managed to follow up on the short position orders according to the strategy.

This is accompanied by the differentiation of bulls in the market and the entry of new short-selling institutions.

During the U.S. trading session, the British pound exchange rate briefly recovered its intraday losses and rebounded to 1.5400 points. However, due to the late trading period of the U.S. trading session, it plunged again and fell back to the intraday low of 1.5350 points.

Then, when the market trading time once again shifted to the Asian session on Thursday, June 6.

The bullish offensive in the pound exchange rate market appears to be weaker.

At the same time, the gap in the number of long and short positions began to narrow further. Although the market's existing long and short positions are still in a continuous increase, the net long position has shrunk from more than 100 million lots a day ago to about 75 lots.

"Boss Su, it seems that the continuous short squeeze by the bulls in the market has finally been contained by us."

On Thursday, June 6, during the Asian trading session, in Hong Kong, in the trading room of the main hedge fund trading department of Huayi Capital Chengyuan No. 16, Qu Zecai stared at the pound exchange rate trend that continued to fluctuate downward and was already difficult to maintain at 1. An excited smile appeared on his face: "Looking at the changes in the long and short positions in the market, it is obvious that short funds are re-entering the market, while the long funds that were forced to short earlier are gradually taking profits and closing positions and exiting."

"The bulls haven't quit." Su Yi said with a smile, "The short positions in the market are increasing, but the long positions are also increasing, but the increase is not as large as the short positions. The net long position in the market has decreased, but the total position has increased. This shows that only the smart short funds that were hesitant before have entered the market, and the main bulls with a lot of floating profits have obviously not given up, but are secretly accumulating strength further."

"Boss Su means..." Qu Zecai was shocked and said, "Will the main long positions in the market trigger an even more rapid short squeeze?"

Su Yi nodded slightly and said, "Of course. After all, many of the news we released have no underlying logical support. They only temporarily affected the emotional feedback in the pound exchange rate market. When the market sentiment stabilizes again, coupled with the Bank of England's continued long position and the monetary policy guidance of stabilizing the exchange rate, it is impossible for the main bulls in the market not to fight back.

Fortunately, through our news release and public logical analysis and argumentation.

The short-selling force in the market has increased significantly.

Moreover, global asset management institutions such as Citigroup, BNY Mellon and Barclays have also begun to change their thinking and joined the short-selling camp.

This gives us more confidence and strength to withstand the next long squeeze storm.”

(End of this chapter)