HK Market views are all forwarded to Absolute Traders' Newsletter.  

Posted by Book Eater

All of my views in the HK market and sometimes currencies are being submitted to Absolute Traders site. It can be read by all the members and non-members who have wished to avail of the subscription. That explains the reason why this blog has been dormant for a long time.

If there are any questions on getting them via mail, kindly post a message to

Gwen P Nava
Absolute Traders & Consulting Services Inc.
mobile: 09178040060 / 09228633299
ym/skype id: gwenpnava


- Nix

Just hit the jackpot  

Posted by Book Eater

Couldn't sleep as I compute the profits I'm going to make in hk, philippines, US and currencies today.


ok. perhaps im taking some of my profits so that I am prudent, let the rest of the profits run.



Posted by Book Eater

term Bottom Confirmed!

As of
5:58 pm last October 13,2008, US Dow equity index futures are up 361
points closing at 8731, with an intraday high of 8,801. Oil which
would represent commodities, have started picking up going to 81.48,
up 3.78 from last Friday’s close which sent it intraday trading
at 77.00, in its lowest. AUD/USD which has been the gauge of
investor fear has also started to find a lot of people’s risk
appetites coming back, bouncing from its low of 0.6370 last Friday to
open .6652 today and managing to stay at 0.6702 as of writing. On
the local currency front, PHP also started to appreciate signaling
that a short term top in the USDPHP trade has been formed. We don’t
discount that the USDPHP chart’s long term trend is still going
up but that it will correct short term, which is a sign that risk
aversion is dissipating.

I copied
the chart of Asia pacific indices this Monday to note that the rally
was broad based. Note that Nikkei and the Japanese indices are only
down mainly because they are closed for a holiday. The 1% uptick in
the Philippines is puny compared to the whopping 10.24% gain in the
Hang Seng Index.

If the
above charts do not convince you that a short term bottom is in play,
perhaps talking about credit default swaps, TED spreads would help
but I am not gonna spend another page convincing you anymore. That
is not the main play. Let’s talk about that 10.24% rally in
the HK market this October 13, 2008 which actually stemmed from the
11% rally of the US indices last Friday, as well as all the
government interventions that the G7 did last Saturday.

Chart of HK Market

You don’t
need a single MACD to tell you that this volume accompanied with
today’s bullish reversal will lift the index back to 18,000

As they
say, those who throw the towel usually find themselves too numb and
callous to see that this bear market reversal is the REAL THING.
This is the short term bottom all traders have been hoping to happen!


Tracker Fund (2823 HK)

Note the
large increase in volume accompanied with the upsurge.



9.50 or lower

Cosco (1919 HK)

Note the
large increase in volume accompanied with the upsurge as well as the
increased volume activity of China Cosco for the past week alone.
This tells traders that there is real demand willing to buy China
Cosco. This is my top pick that will deliver substantial returns.



5.10 or lower


is long the following HK shares: 2823 HK @ 9.10, 1919 HK@ 4.66


Posted by Book Eater in

I have nothing boldly interesting to say.
I simply wanted to write out my thoughts.
So I begin.

I seriously sometimes think about the other things that I could do, which I could have fun doing, with people I probably would be happy being with, doing something unrelated to trading or with any resemblance with the markets that is both challenging, rewarding and something I can want to wake my mornings up to.

I don't know why I suddenly am feeling this way. While steep losses can surely sway a person's mind in changing careers, I surely feel that this is not the case with me. I love my job. It's something I see myself doing in the next ten years. I'm not kidding. However, of course, there could be some twists and turns, which I want to do, if I can do, at some point in my life. Say, take night classes listening to Wall Street finance professionals, touring around the world learning about companies, managing funds say for teachers welfare through people's donations instead of placing them in time deposits, and giving dividends to the school. Maybe buying a place, learning to cook, trying out a sport, and learning to be more of a girl, whatever that means.

However, learning about the markets is hard enough and time consuming. Taking any other additional stuff to do (say studying something like creative arts/ multimedia designing) would be fun but would entail commitment and responsibility. Plus, it's not like a long term thing. It's just a hobby which will quickly fade away to something I "used to do". Such as taking photography lessons, taking photoshop classes and the like.

I'm concerned as well with the way I have been living my life. I feel like a hermit at times. A hermit is someone who likes living alone right? Ok. I think I have been living like a recluse these couple of days.

Hmm, I dont really know. I have no particular set of friends that I will constantly be around with. It's not that I don't have friends. I just don't develop any close connections so much. It's always just about playing basketball. Not so much caring about other people's lives really. Friday is being spent with people who help me learn what God can teach me. Saturdays and Sundays are erratic but they're usually booked, and I usually do things that I don't particularly like doing but, well still do.

brb. need to eat fast. But I'll continue the train of thought.



Posted by Book Eater


Market opened higher by
500 points starting at 19,869.02 but this proved to be the high of
the day as traders used the opportunity to sell their shares. The
pullback due to profit taking from the two big sharp rallies allowed
the market to correct by as much as 650 points down falling to
19,137.67 but quickly found buyers pushing the index higher to close
304.47 points up at 19,632.20.

Market may be due some short term choppy trading due to
the sharp rallies from previous days. Use intraday entry points as
the bias is still up with short term resistance seen at 20,500 to
20,800. It should be noted that the Hang Seng Index closed in a
hammer candlestick chart which is still bullish despite the 3300
points up from the Thursday lows.

Lighten down on positions bought two days ago, look to buy
issues on a pullback.

After recommendation, author has sold Tencent shares(700HK) at 62
and 63 levels after buying last Thursday at 51.90 for a rough 20%
profit. Author has also made tsupita trading, adding more shares
last Friday at 58.50 level and selling at 60.60 last Friday. Author
is currently long 2600 or Chalco at a price of 6.10. This was bought
last Sept 22,2008.

Pick: 2600 or Chalco

has rallied from 4.6 to as high as 6.10 representing 30% profit from
the lows. While the rally seems substantial for some profit taking,
the chart is clearly showing that a MACD divergence is still in play
and strong volumes confirm more potential upside.

Trade using a small position size, so as to have a wide proper stop.



Entry: 5.80


Posted by Book Eater

Theory of Unintended
Consequences. (A collection of stuffs I got from the net- enjoy-

boss and I believe that those who lost money deserve it. Those who
held financial shares deserve their losses. They deserve the loss
for poor risk management, poor technical analysis and poor
fundamentals or lack of knowledge in buying the instruments that
they've done. However, here comes Hank Paulson and his team,
rewarding the sinners and punishing the innocent ones who did their
grunt work analyzing the companies that are bound to go belly-up. An
official from California public employees' retirement system called
shortsellers- greedy predators-. We'll see the ending.

Putting It Out There , chart from

I am long EEM (the emerging markets fund) through call options.
Call options allow you to lose only the capital that you put in.
Nothing more, nothing less. Being defensive :) -Nix

If I had principles, I would have lost my shirt keeping shorts in
this massive short squeeze. I have no conviction ideas. I told my
boss, I am a disciplined trader, but that I didn't have principles.
He laughed . It's true, in this business, we are simply disciplined
traders. We will reinstate our shorts next time. Currently, I will
go long troubled companies in the financial industry, perhaps
intraday trading them due to massive short covering, but not as
conviction longs for position trading.

Read the best
commentaries I've heard from Wall Street active bloggers on the best
market manipulation ever :)

Here’s the deal. The problem was never
subprime. The problem was reckless and uninhibited gambling. That is
now being rewarded and repentance granted. All sins washed away. Ah,
but not without payment from someone to balance the books. You soon
will be getting the bill. Watch for it.

Comment by stockwatch -

Whew! All of the globes financial problems wiped
away in one day!

Comment by stockwatch -

Traders who have sought
to profit from the financial crisis by betting against bank stocks
were attacked on two continents on Thursday. -By Vikas Bajaj and
Jonathan Glater

In these unusual and extraordinary
circumstances, we have concluded that, to prevent substantial
disruption in the securities markets, temporarily prohibiting
any person from effecting a short sale in the publicly traded
securities of certain financial firms…is in the public
interest and for the protection of investors to maintain or restore
fair and orderly securities markets. - from news pages

Here’s the translation: As Republicans,
we’re all about free markets. Until they start to get messy and
then we’re not. Clearly, the folks at the SEC were very busy
last night and it should be  even clearer to anyone who has even
cursory knowledge of the stock market that bad politics are getting
in the way of rational market behavior.

Short sellers may make for an easy target, but
that doesn’t mean it’s the right one. What about the
people — the executives and the directors — who were
making the daily decisions that drove many of these companies to the
brink (or in the case of Lehman, bankruptcy)? Shouldn’t they
shoulder at least some of the blame?

Here’s a radical idea: Let’s leave the
new rules to comedians like Bill Maher. That’s because coming
up with hastily put together new rules — not to mention new
forms that seem unlikely to address the real problem — makes
for both bad markets and bad politics.

-Michelle Leder

Welcome to USA - Where profits are privatized
and losses are socialized. -
this somewhere (just can't remember where).

There is no question
that we are going to spend a lot of public money to address the
current crisis. We have already put a very extraordinary amount at
risk. The question we should be asking is not whether or how much,
but to whom and for what. The financial crisis we are facing is a
symptom of a much larger economic and social crisis. Wall Street is
not the source of the pain. On the contrary, the financial sector has
been put this decade primarily in the service of hiding, literally of
papering over, unsustainable trends in the current account, income
distribution, human and physical capital deterioration, and the
sectoral composition of the American economy. The conventional wisdom
is that this is a financial crisis, and that so far "Main
Street" has been largely insulated from the catastrophe. That is
rubbish. The cancer is on Main Street, and the tumor has been growing
there for years. Wall Street provided drugs to hide the pain and keep
us going, palliative but not curative. What is happening now is those
drugs are wearing off. The American economy is fundamentally unsound,
and has been for some time. We would have noticed sooner, were it not
for financial methamphetamine conjured by mad scientists in lower
Manhattan from a whirlwind of foreign central bank money.

  • Steve Randy

How can short-selling destroy a good company?

The simple answer is that it can't.

First of all, short-selling can't force down your
share price. Short-selling only forces down your share price if
buyers don't emerge to defend your share price.

Banning short-selling cannot protect a bad
If nobody is willing to buy XYZ at a price higher than
$.02 a share, then the price at which XYZ will trade will be $.02 a
share (or lower). It doesn't matter whether you have short-sellers or

What drives stock prices down is the lack of
people willing to buy them at the higher price. If the company has
sufficient value, there will be sufficient buyers.

-Arnold King

Great Articles (Some
are excerpts):

Wall Street Crisis Not Quite 1929

David Wessel

Is 2008 The Equivalent of 1929?

It is not,” writes Berkeley
economist and blogger
Brad DeLong, who
is an
Obama backer.

The most important reason it is not is
Bernanke and Paulson
are both focused like laser beams on not making the
same mistakes as were made in 1929,” he writes on his

Back then, the Hoover Administration and,
particularly, Fed misread the economy, and made a bad situation
worse, a case made definitively by Milton Friedman and amplified by
current Fed Chairman Ben Bernanke in his academic work

They are also focused, but not quite as
much, on not making the mistakes made by Arthur Burns in the 1970s,”
DeLong adds.

In 1970s, then Fed Chairman Arthur Burns
misread the economy and is widely regarded to have bowed to political
pressure from Richard Nixon. He kept interest rates too low and
sparked the Great Inflation that ended only with the very high
interest rates imposed by a subsequent Fed chairman, Paul Volcker.

And they are also focused, but not quite
as much, on not making the mistakes the Bank of Japan made in the
1990s,” DeLong adds.

The Bank of Japan misread its economy, the
consequences of a burst asset bubble and the devastating effects of
deflation, and is widely blamed for contributing to a decade of

They want to make their own, original,
mistakes,” DeLong

Charts from Bespoke Investment Group

we highlight the percentage changes that global equity markets have
seen from their lows yesterday.  As shown, Russia is currently
up 20.2% today.  Yes, the country's bear market has reversed and
turned into a new bull in one trading day!  Hong Kong is up the
second most at 18.7%, followed by China, Singapore and the UK. 
Japan and Australia have seen the most
gains at 5% to 6%.

Shortsqueeze through market manipulation at work in Statestreet stock

Contrast one day's
news article with the chart :)

article from WSJ (Sept 18,2008 145pm) from David Gaffen:

marauders, having burned through the wreckage of the investment
banking stocks, are now moving on to
managers and fiduciaries heavily involved in money-market funds
where investors are worried about their holdings in these normally
safe assets.

stocks most heavily hit include

Corp., down 42% on the day to $37.96 a share,
down 59%,
of New York Mellon
down 21%, and

Corp., which has lost 16%.

Pictures to note:

courtesy from David Gaffen

While seeing that the dollar is literally being burned in the system
today, I am bullish the dollar against the Phillipine peso in the
long run (I.e. my view is that php hits to 49 first rather than 43 a
year from now mainly because of the deleveraging theme, and that USD
has bottomed out. Europe and UK have no room to hike rates and this
will cause an interest differential play. Arguing about my view
lengthily may be written for a different topic. Short term, of
course I am aware that the USD is being battered which provides me
one of the best entries to go long usdphp perhaps at 46, but i'll let
the market tell me the price.)


Posted by Book Eater

short squeeze theory

I think 17s 18s and 19s of the month are more dangerous


Note: This text
may not be readable for those who do not trade options yet. Just to
clarify for those who may not have basic understanding of options:

Calls- A call option is
a right, not an obligation, to buy shares at a specific strike price.

Puts- A put option is a
right, not an obligation to sell shares at a specific strike price.

There are expiration
dates, deltas (volatility range), open interest volumes (liquidity),
strike price that need to be taken into account, other than the stock
price to calculate the option value. Nevertheless, it's not
altogether rocket science in order to trade these things.

At the money(ATM) calls
for example simply mean – the call option's strike price is the
same as the stock price (or whatever the underlying asset is)

In the money calls mean
that the stock's price is now higher than the call option's strike

Out of the money(OTM)
calls mean that the stock's price is lower than the call option's
strike price.


I always wanted to back
up my theory that we will always be in for a surprise during 17s, 18s
and 19s of the month mainly because options will soon expire those
days. Remember August 17,2007? March 18,2008? and more recently
September 18,2008?

I read an article
written by Adam Warner last August 20,2007 who maintains a blog at
the Daily Options Report and here is the reason why it may be what I
think it to be. He writes:

So how does
putting a market-moving Fed action as close to expiration as humanly
possible have the maximal turbo effect? One word:


Consider a world
where there is just one option, ATM SPY calls. They have a 50
so let's say there is an open interest of 100 where each call gives
you the right to buy 100 SPY's. If they are ATM, the calls have
approximately a 50 delta, so presumably the call shorts own 5000
SPY's, while the longs are short the SPY's.

But the delta
changes as the stock moves. That's the gamma. Let's say the gamma is
10, so in other words if SPY lifts a point, the calls now have a 60
delta. The longs can thus sell 1000 SPY's up a point, while the
shorts have to buy 1000 up a point in order to both stay flat. The
quantities are always going to offset, options are a zero sum game,
so it becomes all about the urgency of the two sides.

And who
has more urgency lately? Clearly the options shorts. So it stands to
reason that the higher gamma gets, the more turbo in the stock.

closer you get to expiration, the higher the gamma. And the more
pressure on the side that is squeezed. In other words with a few days
to go, maybe that gamma is 20. So a one point move causes the
scrambling shorts to buy 2000, while the longs can sell 2000,
probably at prices more their liking.

And what if it turns
back down to the strike? The option shorts now have to sell back
those 2000 shares to flatten out again. And so on and so forth.

then the next day maybe they have 30 gamma near the money. Even more
pressure in each direction exerted by the shorts in this

Which brings us to Friday. Gamma is essentially
infinity in the SPX August options. They have stopped trading. They
are merely cashed out at the "opening" price (defined as
whatever the calculation formula spits out taking the opening tick
from each component). The rate cut and market pop comes an hour and
change ahead of the open. All a call short can do to defend his
position is chase futures/ETF's up. Some OTM calls he is short now
have a 100 delta between now and the open. Sure there is an
offsetting long that can sell the futures/ETF's, but who has the
urgency here? Clearly the squeezed short. And thus the kindling wood
lit by the Bernanke match.

Throw in a similar dymamic on all
other index/ETF options that expire at the end of the day, and Big
Ben literally found the perfect minute to cause the most pain to
options sellers.