Prediction: Shorts are Back, Huge Dow Losses

Yes, the final post before I goto bed here in Melbourne, Australia @ 11:35PM GM+11 on October 10 (daylight saving) is that the US Market is going to be hammered much like the rest of the world. The worst thing ? Short selling is back in the USA after being blocked for a one month period.

What does this mean? Well what do you think! It means that everyone will ride the negative market sentiment as much as they can. This will only compound the market losses and increase the level to which the market falls.

Prepare for another record day of losses.

Don’t know what Short Selling is?

Typical short selling is referred to as covered short selling - the practice whereby a trader sells a security that they do not own with the expectation that the value of the securities will decrease allowing them to sell the securities at current market prices and then buy the securities back when they fall in value. With enough value drop, the trader can purchase the securities and ‘cover’ their position for less than they received for selling them earlier. Of course, if the price increases then the trader is required to cover the increase and they lose money. The difference between a ‘covered’ short selling and a naked one is that a naked short sell is selling a stock without borrowing the shares. This creates a position when the seller does not obtain the shares within a specified time period and subsequently fails to deliver on their obligation. This type of short selling typically incites more negative sentiment in a stock.