So here you are, champing at the bit to short because your favorite blogger who has been bearish since 2011 has been on fire this year. You see the DOW down 300 points, and you are completely convinced that this 2008 all over again. Well, shorting is just not the opposite of going long, the dynamics are entirely different, and the last thing you want to do is short in the hole or short an oversold market (presently I don’t think we are oversold).
Here is one significant fact about shorting in bear markets:
The biggest rallies happen in corrective/bear markets, exactly when bears should be making a killing. The minute you get overconfident that this is the end of the world you get a mere 3-5 days dead cat bounce that wipes you out. If we are truly in a bear market that bounce will fade and lead to lower prices, be patient, short the rips.