When you ask people what the most important thing to follow or look for when you are trading stocks is, you will hear all kinds of opinions, but what is the real answer? Just as when selling real estate (location, location, location) the most important thing in trading is price, price, price. Coming in second is volume. As an example of how price trumps all, here is a price chart of Technology (XLK) and Energy (XLE). It doesn't take a rocket scientist to see that XLK prices have been climbing higher for some time now and XLE has been treading lower with some bounces on the way down. Which would you short tomorrow? If you answered neither, you would be in agreement with me, because the market is still on offense. Those spikes or volatility would make it very difficult to short when you get a short squeeze or when those who have shorted XLE have to buy it back to cover their position. It's always much easier to short when you have the wind behind your back and the market is on defense.
Neither? Yet you say "XLE has been treading lower with some bounces on the way down." and "It's always much easier to short when you have the wind behind your back and the market is on defense." I would say it is always easier to short something that is not rising with the overall market.