I could only begin chuckle as I think about how many Long Only and Long Bias funds Blew up and closed their doors within the past 12 months. This has obviously created some forced selling from firms who need to liquidate their positions. For the Market to truly turn around and be in the next "Bull Market", Ultra Bearish Funds need to blow up as well. When you burrow stock to short, your broker locates the stock and then "lends" it too you. To cover your short you need to actually buy back the stock in the market, hopefully for a lower price.
The situation too keep an eye on is a short selling fund blowing up due to a rally in the market that forces huge amounts of forced buying. It may sound a bit strange to hear the words "Forced Buying". For the market to truly turn Bears who shorted too much stock at the lower price levels need to feel some real pain.
For a true "Market Bottom" we need to clearly see the other side of the coin. The scramble to buy stocks needs to be as intense as the broad based selling that has occurred over the past 12 months. Until then the Bears will continue to sell Rallies and maintain control of the markets.
But would this short blow up even make the news? I highly doubt it. No one really complains when stocks go up.
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