On question #2 you are correct in thinking a legitimate short seller is limited in what he can do to move price. He sells an overbought market, skims off a few bucks as the price drops, and adds liquidity to the next rally as he covers. No harm, no foul.

There is another side to this situation though that can drive a company right out of business and that is illegal "naked short selling." If you don't know how that works, how poorly it is policed or regulated then watch this presentation. It takes an hour but it is time well spent.

http://www.businessjive.com/nss/dark...

It is this activity which is dangerous to all but particularly small companies and must be stopped.

P.