The UK’s SFA and the US’s SEC announced rules to restrict the short selling of stocks last Wednesday, global stockmarkets rallied tremendously on Thursday and Friday. It led to the biggest rally in the last 38 years, this amid one of the worst week’s in financial memory.
The shorting of stocks is when pessimists to buy put options giving them the right to sell those stocks at a perdetermined price at some time in the future. This tends to add impetus to stock market negativity.
The move to restrict shorting was a brave one. It showed how concerned financial regulators were that markets could continue to go down because of the prevailing negative sentiment.
Lets hope this has assisted bulls in their quest to buy stocks at bargain basement prices without further delay. This will then gradually change sentiment as traders see more and more chance of making gains in the near term.