There are many colorful expressions on Wall Street. One is a “dead cat bounce.” Imagine your cat dies, and you toss its carcass out the second story window and watch as it hits the driveway below. It doesn’t land motionless, like a towel. There is a slight bounce when it hits the concrete. Yesterday, you witnessed a “dead cat bounce,” when the Dow rose 400 points, after losing 600 points the day before. The bigger the initial loss, the higher the bounce.
That makes today problematic, as Fridays are traditionally the most volatile day of the week. Because anything can happen over the weekend, traders often sell stocks and hold only cash until Monday, when the market reopens. It is most common for Fridays to close with a loss. If that is the case today, I hope the Dow drops 1,000 points. Market bottoms occur when you hear that great flushing sound and the cries of wailing investors.
