1) Market 2) Market Participants 3) Market Catalyst 4) Leverage 5) Speed of Execution What I've observed over the years, if the market conditions are viable, equities on the whole are upwardly biased. And become barometers of sentiment of the American public. Market participants become segregated in terms of speed of execution and leverage. Into small retail, to large money pools, what percentage of the daily turnover in volume on exchanges is conducted by retail versus large money pools/institutions, I'm not sure of. I would have to think that retail turnover is pretty low, and decision making skills are based on emotional extremes. Whereas institutions are constantly in the market making decisions and speed of execution is unrivaled. So when news headlines are filled with losses and pessimism, it causes a shift in retail to enter the market and do what is most implied by the news events, sell low and buy high. Institutions on the whole, do the samething but speed of execution raises the bar above retail. If the aggregate decision making leads one to sell and selling abates, the leverage taken to the downside needs to be lifted very quickly. Such as short interest, since on the whole short interest can only capitalize on short bursts in pessimism. Since speed of execution is unrivaled by institution and program trading. Retail or smaller parties is forced to buy at a premium to to the bar institutions have set it to. Thus shorts become cornered. If media executives can control the headlines to fill it with pessimistic news, then longer periods of declines can be entertained. So the question becomes. Based on the present information and set of conditions, how long can the same news lead to sustained selling. Last year we had the middle east crisis with cities being bombed from above filling the airwaves. This led to the continued persistence of pessimistic mood. The safest thing to do would be to let the news playout but when further declines are failed to be realized with the same news, then watch for the bid to be raised very quickly. The short interest would be forced to cover at blown out highs on the indicies. http://bigpicture.typepad.com/comments/2006/06/short_selling_s.html cool analysis at this site.