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Reply with quote  #1 
Some may recall last July (2007) the "powers that be" decided the uptick rule for short selling was no longer necessary.  Several months later, it appears there is a possibility the table was being set last July for exploiting the coming trouble in the US equity markets.

The first chart is the NYSE daily short sales as a percentage of NYSE sell volume, the data posted daily at this link:

in the Volume Summary table in the lower right corner of the web page.

Note over the couple of years leading up to the May 2006 price top, the NYSE daily short sales averaged around 21% to 25% of total sell volume, and then began climbing through the March 2007 bottom.  When the SEC was finally convinced it was okay to eliminate the uptick rule for short selling, it appears the door was opened to take advantage of not having to wait for buy orders to sell short.

The time frame when the short selling uptick rule was abolished is circled on both the SPX curve and the short sale volume percentage of sell volume curve.  Over the past couple months, the average short sale volume has now reached over 40% of total sell volume....

Even the odd lot traders have jumped on the no-restriction short selling bandwagon, reaching by far, the highest levels of odd lot shorting activity in the 37 years of this data I have access to.

I'm sure the elevated level of short selling activity since the market began having problems in the summer of 2007 is strictly an innocent coincidence and there were absolutely no nefarious activities involved.



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