When the government introduced measures to cope with abusive short selling...the whole game has changed ever since. The other thing is the "Uptick Rule" which has not been mentioned ever since the announcement was made to re-implement it.
Lets start off with this concept that "Shorts" are actually piggybacks on "Sellers". I have been pointing this out since the beginning of this rally.
There are still some funds still holding on to their positions which they purchased last year when the S&P 500 was around 850 - 900. These are the strong hands who will not let go of their holdings believing that the market will turnaround. History has proven them to be correct up to this point. Question is are they letting go anytime soon?
We must remember that the stock market is not a Wild Wild West, people will learn from their past mistakes and adapt to it. If "dinosaurs" are as adaptable and smart as we are they would not become extinct.
Moving forward the only risk I see is for the stock market to move sideways for long periods of time and this is not going to be a very profitable environment for directional option traders.
I do not disagree that the market can retrace at any time, but if you do not expose yourself to that sort of risk.....you are safe.
I still do not understand why some traders are still shorting the market when this market is still clearly in a strong uptrend.....Perhaps their gurus taught them to go short in a bull market..?
Tuesday, May 5, 2009
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