Tuesday, March 24, 2020

Dead cat bounce

A dead cat bounce is a brief recovery in a declining market. Derived from the idea that even a dead cat will bounce if it falls far enough, the phrase is applied to any case where something experiences a brief resurgence during or following a severe decline.

The DJIA is showing key components of a dead cat bounce. 1) stocks rising on stimulus, 2) record-high outflows from investment firms, 3) the coronavirus outbreak that hasn't peaked and 4) fear and a rush to safety.
More bad news is the only certainty. The US expects to report over 1m jobless on Thursday.
This space again looks to label the problem, is it acute or chronic. Until Covid-19 is brought under control it is a chronic problem, one that MIGHT be resolved in months, not weeks. A body avoids chronic problems. Buying into a dead cat bounce is a recipe for disaster and a sure fire way to compound losses. That goes double for speculative venture garbage.