Dead-cat bounce on SPY!?

Discussion in 'Trading' started by short&naked, Sep 11, 2009.

  1. The entire rally from March on could turn out to simply be a dead cat bounce (which is a specific type of bear market rally usually found in stocks). They occur because buyers perceive a market that has plunged a lot in a short peroid of time as cheap (even if the fundamentals say otherwise). This happened to CROX several times in 2008 (for a good example). The gap in Oct could form an area of resistance causing a turning point in the rally.
    If the gap is not cleared to the upside, this is VERY bearish.

  2. I would be astonished if that gap didn't turn out to be resistance.
    Resitance <> wall.
    We're at that point where things get better, and folks start to think ahead to when the Fed starts draining the liquidity. The Fed is already withdrawing its guarantee to money market funds, and the talk now is of various withdrawals and paybacks, now that the worst of the panic has subsided.
    This kind of first dawning of recovery resulted in a classic 10% drop back in 1983, after the start in Aug 82 of the massive bull that ended with the dot-com mania. A 10% drop from here would be completely normal.
    I wouldn't expect that gap to be cleared until sometime well into 2010.
  3. Isn't dead cat bounce supposed to be short-lived? Maybe the cat is not dead after all.
  4. lindq


    LOL. I've heard a lot of good ones in my trading career.

    But I have to admit that using CROX to set parameters for the SPY is a new one.


  5. Huh? Yes, a dead-cat bounce can occur on any currency, commodity, future, etc. CROX was simply another example. That's why it's called a PATTERN.

    Frankly, I don't get your point.
  6. This pattern looks to me like a massive H&S bottom and the a gap fill could lead to a runaway market.