Invariably, we will receive emails asking us whether sending out a couple of SSS reports means we are turning bearish on the market, so we'll answer that with a quick, qualified, no. One way we like to test the strength of a rally is by shorting a couple of targets in a reasonable short-sale positoins. If they feel soft, that can tell you something about the market. If they aren't soft, then that is also telling you something about the market. If the general market holds up or starts to firm up going into the end of the day, we may end up covering any short positions taken during the day and waiting to see if the genral market changes in the coming days. Meanwhile, long positions that may be acting well are also telling you something about the market. We tend to see this market as a bit volatile and rotational here, with some groups getting smacked around on any given day while others act very well. When short-selling, it is critical to try and synchronize your shorting with the general market. If the market remains resilient, be cautious about shorting into the face of this action if your shorts and the market don't "give it up."
SSS - General Thoughts on Shorting Currently
| Published: | 22 Oct 2010 18:22 ET |
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