Hi Dale:
Not on no volume, but on light volume. This is the way I conceptualize the difference between markets with uptick rules (like Nasdaq) and those without (like TSE). In a market that is moving down fast, most if not all the trades occur at the bid ... no one is hitting the ask, and as a result each successive trade sends the price lower (if you've ever traded an internut, you know that it happens frequently). If there is an uptick rule, the short order essentially gets entered at the ask, and someone must hit the ask in order for it to be executed. As a result, the short sale itself at least temporarily puts a halt to the downward price movement and does not contribute to downward momentum. But, if there is no uptick rule, then the short order goes in at the bid (assuming again a fast moving down market) and contributes to the selling pressure in term of volume if not actual price movement. As long as some non-short seller is willing to hit the bid, the short seller can get his order executed. This also applies to resting stop short sell orders, which in an uptick market would have to see price first go down past the stop and then come back up to it in order for execution to occur.
That's kinda long winded, but the gist is that in a no-uptick market a short seller adds to downward momentum by being executed at the bid, whereas in an uptick market the short seller actually helps slow down the momentum (even if ever so slightly).
If someone else would like to offer a better explanation that explains the mechanics of these two types of markets, please do ... my understanding is intuitive, not necessarily accurate! :o) |
