“Never short a dull market”
Last New Year’s eve I was on CNBC with Mark Haines and I had prepared some truisms for the new year … “The Trend is your friend” being one of them. Mark exclaimed but “C’mon Denise, you haven’t told me anything I didn’t already know!” …Well yes Mark … but I am not talking to you I am talking to your listeners… and they tend to forget.
Never short a dull market is the same. Traders get bored. They like to be short (for a variety of reasons but mostly having to do with the rush I think)…. so when they are bored they think “what the hell – it can’t go up so I will get short.” Then what happens …. usually a vicious, quick short squeeze just before it drops right through the floor.
Why? Most day-traders put their stops too tight – so all you need is one too tight stop market order and it kicks off the one above it and the one above that and so on and so forth… THEN … those buy orders (and their counterparts that were formerly BELOW the market) are gone… and to the day’s floor we go.
So… boredom usually means the market will make a quick trip up before it goes down! … USUALLY.