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Thursday, 31 May 2012

Euro-USD: 31 May 2012, Thursday, 8.15am Singapore Time

Euro-USD 1.23100 -1.23300 area will be the reversal point for Euros and financial markets to do an immediate term/short term reversal for all technical rebounds in Stocks, Forex and Commodities.

Look to long Euro for immediate term rebound at 1.23100 -1.23300 for 1.25000-1.25240 Target Price.

Euro-USD: 31 May 2012, Thursday, 12.12am Singapore Time


Worldwide stock markets are likely to have immediate few days' rebounding upmove together with Euro.
This rebound can prove to be a short term game changer, it can remain as mere dead cat bounce. The answer will be revealed at the intersection of RED-BLUE lines. Forex market recently sets the tone first.

Wednesday, 30 May 2012

Euro-USD: 30 May 2012, Wednesday, 11.25pm Singapore Time


Yesterday's Euro-USD Hourly Chart

Euro-USD Trade (yesterday 29 May 2012):
Short if 1.24963 breaks down for 1.24000 Target Profit (TP) area as target
Long if 1.24963 holds and BLACK BOX REGION (triple resistance) breaks up for 1.30816 Target Profit (TP) as target.

SETTLEMENT (today 30 May 2012):


Funds Flow Analysis (FFA): 30 May 2012, Wednesday, 3.46pm Singapore Time

Big hands1 dumped all their longs of yesterday in Asia today, not only that, they added shorts in addition to all this massive dump in indices contracts today. Strength-index in indices holdings decreased from +4.98 to +0.91 now. Big dump in one day with large volatility. Puts on hand further increased from the already large -4.42 to the even larger -5.90; one day's index contracts massive longs from yesterday are all dumped with some piling up of shorts on top of the dumping. This caused much selling pressures in Asia. Their huge stockpile of puts on hand accumulated over the weeks are now even more deeper in the green (in-the-money) due to the crazy volatility down today. So the reason for huge puts accumulated over the weeks are now clear. Using indexes to profits on Puts for Big Hands1. The little loss in index contracts are little compared to the plunge to give the higher beta Puts even way more profits.

Meanwhile, the shorts in index contracts of the more powerful big hands2 are deep in the money although they had reduced rate of adding shorts as per mentioned on Monday. Their shorts on stocks are also very much in the money. If Big Hands2 start to cover soon and stop shorting, it would be the true bottoming out in short term. However, this must happen in BOTH stocks and indexes in order for a true bottoming out for the longer time frame of short term or mid term (and not solely for immediate term).

Note: Big Hands1 refer to a specific powerful large group of big hands and Big Hands2 refer to another similar profile group of foreign funds/hot money elsewhere. Big hands are the real market movers. Together with Big Hands3, also elsewhere, their actions are significant because they are hot monies/market moving monies. They are the foreign funds and the big whales, related to one another, and they operate in mainly Asia/Asia-Pacific, US and Europe. All 3 large financial markets are inter-related: Asian market movements, US market movments and European market movements, as finacial markets are closely linked in the modern globalised world. Asian markets' BB actions during the Asian trading day is often a prelude to certain movements in Europe and US in Asia/Asia-Pacific night hours.

Donovan's Funds Flow Analysis
Strength-Index Scale Key:
negative (-ve) = shorting power;
positive (+ve) = longing power;
0:  No shorts and no longs (directionless)
1-2: Weak strength (trying to have a direction)
3-4: Moderate strength (some direction is building up)
5-6: Strong strength (strong attacking directional power is building up)
7-8:Very strong strength (very strong attacking directional power is building up)
9-10::  Rally Mode in store / Plunging Mode in store

Donovan's Funds Flow Analysis Index Oscillator: -10 ----- 0 ------+10

Tuesday, 29 May 2012

Euro-USD: 29 May 2012, Tuesday, 11.48pm Singapore Time

Euro-USD Hourly Chart

Short if 1.24963 breaks down for 1.24000 Target Profit (TP) area as target;
Long if 1.24963 holds and BLACK BOX REGION (triple resistance) breaks up for 1.30816 Target Profit (TP) as target.

Tuesday, 22 May 2012

Short-Selling Ban: Is It Effective?

Copyrighted by me, so no contents from here is to be replicated without my prior permission.

The following article is about Spanish government and other European markets' implementation of short-selling bans, my own explanations of why short-selling bans will not work and why short-sale bans will even backfire.

Most people often hear of the Big Hands and Insiders proclaiming that short-sale bans are ineffective market interventions and such mechanisms may even distort the market. The media merely repeats them without any explanations as they do not know the exact reasons too, except that the insiders said so.

Explanation Part 1:

Those who implement short-selling bans may be too naive to think that short-sale bans will limit supply and jack up demand, or at least that by limiting supply and ceteris paribus, prices will go up or remain more stable. It is gullible, or even naive, to assume that this theoretical mechanism in the Economics of Demand and Supply in a Perfectly Competitive system will work.

In a system of market, when there is no more short-selling, there will be no more short squeezes to push up the market (e.g. the Spanish market after they implement it), hence there will be effectively no incentive to collect opportunistic or counter-trend trading-longs to kill shortists and profit when markets get oversold (note: trading longs is DIFFERENT from investment longs); when there are no shorts to squeeze during a counter-trend wave in an outright bear market due to banned shorting, the rebound will be weak or very short-lived. This is because there will be no one who will be forced to buy high (demand at higher prices) and thereby providing a stablised and normal market mechanisms for unloading if someone (investors, traders, funds) wishes to get out at reasonable prices in prevailing market conditions.

No big hands, market makers nor anyone sound and logical would bother then to long/buy anything in a fundamentally-bad cum short-sale banned market. This is especially so when fundamentals are obviously awful or with even no fundamentals to speak of, except to long/buy merely for opportunistic rebounds to wipe out weak shortists or late shortists, thereby providing the all important demand.

Essentially, one can see that short-sale ban does a lot of potential harm in the market mechanisms by removing the demand layer when markets get oversold, rather than the cliche of inducing more supply in the economics side. The exit door, hence, gets narrower and narrower since the buy queues will thin out due to the lack of stimulus for counter-trend waves. The fibonacci ratios which are a natural law of life will then get distorted and not realised.

This "narrow door" further exacerbates when everyone wants to rush out, and because there will be no counter-trend long/buy-queues there waiting in anticipation to absorb sellings in a market that bans short-sellings, this effectively worsens the whole situation especially when bad or scaremongering news further inundate the market.

Often, short-selling bans are the final cat out of the bag of a serious bear market. This is because there are no more tools to use and policy-makers are desperate. It often serves to confirm that the cream has already turned sour. Sour creams can now only turn more sour. Essentially, short-sale bans are also often a prelude sign of a full-blown crisis.

Explanation Part 2:

On an extended induction to my explanations above, during a short-selling ban, because big long term investment funds think far ahead, they will get worried of the future high possibility of thinning-out buy queues, and may sell off first to avoid the future potential trouble of finding no counter-trend buyers. The selling on immediate term and short term may even be high due to "I better sell off and get out earlier than you do, because there will be no buyers there to catch falling knives to kill shorts anymore, especially when the fundamentals are so poor". In theory, banned short-selling is supposed to improve demand and reduce supply, but real life does the brutal opposite.

After the stage where long term investors attempt to get out on "short-sale ban knee-jerk rebounds", the long term Big Hand shortists also come in.

On surface, shorting in a short-sale banned market appears illogical. However, the real case is often the opposite. In this case, there is now an almost 100% sure case that the illogical action of shorting the short-sale banned market will definitely be a win. How? Knowing for sure that there will be no more demand at the buy/long queues to catch or support short-sale-banned market anymore (as per explained earlier), the big hands can now safely load put options, put warrants, any forms of fancy puts, shorts derivatives and those financial derivatives that give much higher-beta returns. These can be accumulated easily because most market participants think that Big Hands are not able to short anymore, markets are rebounding again and valuations are cheap.

The Big Boys (BBs) join in buying the large cap stocks and index stocks to help push up the stocks market of the short-sale banned market as they need these for their operations later. On the other hand, they do a set up on the opposite side over a period of time. They load up all the put options, put warrants, bearish CDS, fancy shorts and the shorts derivatives. For the index stocks they have on hand, they can easily sell and pour and dump at the future thinning buy/long walls (as explained earlier) that will break like tofu or wobbly jelly. Easy effort.

The deliberate loss made in selling the index stocks and big cap stocks is nothing compared to the high beta financial derivatives that are numerous folds in profits, which when leveraged is further magnified. All these index stocks and big caps stocks are just tools for the opposite high-beta derivatives, and the short-sale ban ironically facilitates the shorting process. When the time is ripe after accumulation, even though no shorts are allowed, BBs deliberately dump and pour out all these index stocks at a loss to plunge the market ("I have the stocks, so I am not shorting"); on the other hand, their derivatives spike up in profits, way larger from their losses made from index stocks and large cap stocks. On the way, panic retailers will help to contribute to the cause and hasten the process.

With no one there for a counter-trend shorts-slaying to push up stocks, there is a common understanding that if one tries to load up stocks in this short-sale banned lousy fundamentals market, one is almost sure to lose. Firstly, fundamentals are bad. Secondly, there is no more demand from shorts-killing traders, hence one is highly likely to suffer bad losses from stocks should one buy in this "supposedly demand-jacking and supply-limiting" short-sale-banned market.

The whole financial systems are a complex. Thinking in too simple terms or analysing in too simple ways is plain stupid, at times hastening one's death instead of preserving one's longevity.