What is a “Dead Cat Bounce? – Is The Recent Market Gains a Dead Cat Bounce?

Dow Jones Industrial Average Chart March.20.2009 Dead Cat Bounce

When it comes to stock trading the term “Dead Cat Bounce” basically means a sucker rally, after a steep drop in the market. The term dead cat doesn’t sound very appealing, but somehow this phrase “Dead Cat Bounce” stuck among Wall Street financial professionals.

The recent rally in the stock market could be a dead cat bounce. The Dow Jones hit a low of around 6500 and over the last 9 days rally up to 7400, that is roughly 900 points upside. Now, if you are a quick trader, then you could have made some fast gains by taking some profit of the table in the last day or so.

As of yesterday, we can already see the markets unable to stay in the positive territory, the rally of course is not sustainable. Over the next few weeks or so, we could see it re-testing the lows as many companies came out with profit warnings and more layoffs.

My feeling is that the stock markets will see saw up and down within a range, retesting the bottom we do not know what the next piece of data is and whether the stock market will break through the bottom lower or break through on the upside. A great environment for fast nimble channel and swing traders.

Don’t take my word for it, do your due deligence.  Please read my “Disclaimer”.

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