Humphrey didn't really believe the data provided by Frederick, after all, at this time, the 'Aberdeen Asset Evolution No. 1' main hedge fund product was in the position of the market's main short seller, so it was not surprising for it to deliberately release any bearish statements and data.
"With your 'BlackRock' market intelligence gathering and research analysis capabilities, I believe you will soon clearly recognize that the current GBP exchange rate market is a huge bull trap market,"
Frederick said.
"I also hope my friend can stand on the same front with me, just as we fought side by side in the 'Swiss Franc Black Swan' event before, to seize the huge profits from this market round."
Humphrey nodded and responded,
"Hmm. Thank you, Mr. Frederick, for the kind reminder."
After the two finished discussing business, they chatted about life for a few more moments before hanging up the phone.
And after hanging up the phone...
Humphrey pondered 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 Frederick sent him to the other party, asking them to verify it as quickly as possible within one or two days.
After doing all this, he thought carefully again.
He finally decided to immediately reduce some profitable long positions, lowering the proportion of GBP long positions in the fund's holdings.
Just as Humphrey was influenced by his old friend Frederick.
He began to take profit and reduce positions, covering his GBP long positions.
At the same time, in New York's Wall Street, USA, at the foreign exchange investment trading department of the globally renowned investment bank, 'Citibank'.
Enoch, the Foreign Exchange Investment Trading Manager, stared at the fluctuations in the GBP exchange rate.
After listening to the analysis report and market information report from the market research department, his brows furrowed noticeably.
He sensed a growing tension between bulls and bears in the GBP exchange rate market, with traces of increasingly clear extreme market trends.
"Edmund, what did you just say?"
Enoch, who had come back to his senses, hadn't heard clearly what Edmund had just reported, so he couldn't help but ask again.
Edmund replied,
"According to the data we have compiled, at the current stage, the multiple foreign exchange investment fund products managed by our institution still show a significant net long position in the number of long and short positions established by investors through our fund products. This indicates that market investors generally still view the GBP exchange rate bullishly."
Enoch nodded slightly, then asked,
"What about market news?"
Edmund replied,
"On the Bank of England's side, their current stance remains unchanged, and they are still carrying out new market operations to further stabilize the GBP exchange rate. The British government, on the other hand, is intensively preparing for the nationwide 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 cannot possibly exceed 50%."
"Anything else?"
Enoch continued to ask.
Edmund thought for a moment, then replied,
"Also, the main short-selling institutions trapped in the market are making a strong counterattack, especially with reports about Mr. Frederick, the star fund manager of 'Aberdeen Asset' group, firmly bearish on the GBP exchange rate, and a more intense online discussion about a young man named Su Yi from 'Huayi Capital' openly challenging global long-position capital."
"What are people saying in the online discussions?"
Enoch then asked.
Edmund replied,
"Regarding 'Huayi Capital,' an institution with a very ordinary capital size, and this young man Su Yi, who doesn't know his place and has been quite active recently, the vast majority of investors and numerous speculators online all wear mocking expressions, widely believing that such a small institution as 'Huayi Capital' simply cannot cause significant fluctuations in the GBP exchange rate market, let alone withdraw unscathed after massive losses."
"This institution called 'Huayi Capital,' with its 'Huayi Chengyuan No. 1' main hedge fund product..."
Enoch thought carefully for a moment, then continued,
"It seems they have also established quite a few short positions on our 'Citibank' foreign exchange trading platform, haven't they?"
Edmund nodded and said,
"Not just quite a few, but many. And through our monitoring, we found that this guy not only hasn't reduced his short positions, but is actually continuously increasing his short orders on the GBP exchange rate, even though many associated trading accounts have already incurred significant sustained losses."
"Still continuously increasing short positions?"
Enoch was slightly surprised, then let out a soft laugh and said,
"It seems this Mr. Su is a firm bearish investor, and also a very bold gambler."
Edmund asked,
"Do we need to closely monitor 'Huayi Capital's' trading accounts opened on our trading platform? After all, if this main short-selling fund in the market gets margin called, it would still have a significant impact on our institution, and also a relatively adverse impact on other main players in the market."
Enoch thought for a moment and said,
"No need. Mr. Su from 'Huayi Capital' is a smart person. Monitoring the dynamic position changes of the fund products he manages is not very useful for us... Instead, 'Huayin International' entering the market to short, and publicly supporting 'Huayi Capital' in shorting, is what we should be wary of!"
Edmund smiled and said,
"Huayin International? This institution indeed has a very large cash flow reserve, but in foreign exchange market investment trading, it seems they have never made a profit and exited. Every time they intervene in the foreign exchange market, they are basically forced by various institutions to stop loss and cover. This time... looking at the situation, it's highly unlikely that anything unexpected will happen."
Enoch smiled as he glanced at Edmund and said,
"Is that what you think? I don't think so!"
Edmund was slightly taken aback when he heard Enoch's words and quickly asked,
"Listening to you, Mr. Enoch, are you bearish on the recent performance of the GBP exchange rate?"
Enoch replied,
"Although there's no definite conclusion yet on bearish or bullish, the market still has nearly a million lots of net long positions at this time, which still makes one nervous and uneasy!"
"I don't find that strange at all,"
Edmund said.
"Recently, the GBP exchange rate has almost always been on an aggressive upward trend. Funds actively shorting are relatively few, and long positions covering are also few, which has led to an ever-expanding net long-short position and an increasingly imbalanced long-short pattern in the GBP exchange rate market. I think this is entirely understandable, and I believe it's also another portrayal of the market's strong bullish sentiment."
"It's not that simple,"
Enoch said, based on his years of trading intuition.
"No matter when, the market never allows the vast majority of people who stand on the side of a consensus expectation to make money, and in financial history, overly consistent expectations are rarely realized."
"Mr. Enoch means..."
Edmund was slightly startled and said,
"You believe the GBP exchange rate market won't necessarily move in a consistently bullish direction next?"
Enoch pondered for a moment, not answering directly, but instead asked back,
"How do you think nearly a million lots of net long positions in the market will choose to exit?"
Edmund replied,
"That goes without saying. They'll definitely smash the main short-sellers, then seize the opportunity of the main short-sellers being forced to cover their positions, quickly establish hedging orders, and exit!"
Enoch said with a smile,
"What if the main short-selling institutions in the market are determined to hold out until June 23rd, vowing to reveal their final hand? How many of the investors holding such enormous long positions, who have already made some profit in the market, do you think will be able to resist holding onto their unrealized gains and betting one last time with the main short sellers?"
"According to trading logic, I'm afraid many people will exit and take profits, aided by expectations, before the mystery of the June 23rd referendum results is revealed,"
Edmund replied.
"The mystery of the referendum results, given the current long-short situation in the GBP exchange rate market, might be a huge opportunity for the main short-sellers to reverse the market trend, but for many profitable long-position holders in the market, it might not be that important."
Enoch nodded slightly and said,
"You are right, therefore... with net long positions in the market having surged to such an extent, the upward momentum of the market has not only not strengthened but is actually weakening.
At this point... as long as there is even a slight piece of negative news in the market, the GBP exchange rate will plummet quickly. This is also why current main short-selling institutions like 'Aberdeen Asset,' 'Huayin International,' 'Huayi Capital'...
Although most of the news released to the market was unconfirmed false information, it suddenly led to the GBP exchange rate easily plunging by over 100 points, which is the underlying logic and fundamental reason.
From a pure trading logic analysis, the risk-reward ratio for shorting at this time is far higher than for going long!
Also, I carefully reviewed the market information and short-selling analysis reports released by several major short-selling institutions in the market today. I feel that the views expressed by these institutions are not without reason.
In the current market, everyone says that the June 23rd referendum result will definitely be the expected 'remain' outcome, but what if something unexpected happens?
If we consider the referendum result as a probability math problem. Then, without a doubt, the probability of a Brexit or non-Brexit referendum result is actually the same."
After listening to Enoch's analysis, Edmund, who had been full of confidence, was instantly startled and quickly replied,
"It seems that 'Huayi Capital,' as well as the 'Aberdeen Asset Evolution No. 1' main hedge fund, and several other main short-selling institutions in the market, are not simply making a high-stakes gamble in their choice of shorting motives!"
Enoch smiled and said,
"No matter how bold a gambler is, they wouldn't bet hundreds of millions or billions of dollars at once. Upon closer analysis, the logic for shorting the GBP exchange rate at this stage is actually more sound than the original logic for going long on the GBP exchange rate."
"So, Mr. Enoch, have you decided to short?"
Edmund asked.
Enoch replied,
"In the GBP exchange rate market, with such a massive volume of long and short positions, everyone knows that extreme market conditions will erupt here. Since the probability of success for shorting is higher now, and our institution also has the necessity of establishing short positions to hedge our proprietary fund products' net long positions, then why not follow suit and short a bit, trying to seize the highly probable opportunity for huge profits in the market?"
After speaking, Enoch didn't wait for Edmund to respond further.
He turned around and began instructing the foreign exchange investment fund managers and their trading managers in the fund trading department he managed to follow up on short position orders according to the strategy.
And with the divergence of long positions in the market and the entry of new short institutions.
During the US session, the GBP exchange rate briefly recovered its intraday losses, rebounding to 1.5400, but then plunged again in the late stage of the US session, falling back to the intraday low of 1.5350.
And then, when market trading time once again moved into Thursday, June 16th, the Asian session.
The bullish offensive in the GBP exchange rate market appeared even weaker.
At the same time, the gap in the number of long and short positions also began to narrow further.
Although the outstanding long and short open positions in the market continued to increase, the net long positions, which had exceeded 1 million lots a day earlier, were re-reduced to around 750,000 lots.
"Mr. Su, it seems the continuous short squeeze by the bulls in the market has finally been contained by us."
On Thursday, June 16th, during the Asian trading session, in the trading room of 'Huayi Capital Chengyuan No. 1' main hedge fund trading department in Hong Kong City, Qu Zecai gazed at the GBP exchange rate trend, which continued to fluctuate downwards and was already struggling to hold at 1.5350.
A look of excitement appeared on his face:
"Looking at the changes in long and short positions in the market, it's clear that short funds are re-entering, while the long funds that previously squeezed the shorts are gradually taking profits and closing positions."
"The bulls haven't exited yet,"
Su Yi said with a smile.
"Short positions in the market are rising, but long positions are also rising, just not as sharply as short positions. The market's net long positions have decreased, but the total holdings have increased. This indicates that only the smart short funds that were previously hesitant have entered, while the main long-position holders, with substantial unrealized gains, clearly haven't given up and are secretly accumulating further strength."
"Mr. Su means..."
Qu Zecai was startled and said,
"Will the main long-position holders in the market ignite an even more aggressive short squeeze next?"
Su Yi nodded slightly and said,
"Certainly. After all, many of the various pieces of news we released lacked underlying logical support and only briefly affected emotional responses in the GBP exchange rate market.
Once market sentiment stabilizes again, coupled with the Bank of England's continued bullish stance and monetary policy inducements to stabilize the exchange rate, it's impossible for the main long-position holders in the market not to counterattack.
Fortunately, through our news releases and public logical analysis and argumentation. The short-selling power in the market has significantly increased.
And large global asset management institutions like 'Citibank,' 'BNY Mellon,' and 'Barclays Bank' have also begun to change their thinking and entered the short-selling camp. This gives us more confidence and strength to withstand the next bull short-squeeze storm."
(End of chapter)