Dead Cat Bounce

A figurative term used for periods where declining prices of stocks and assets recover briefly and then continue to fall.

A dead cat bounce refers to a period where the price of an asset, security, or stock picks up briefly and then continues to fall. The term is widely used on Wall Street in response to the nature of stock market fluctuations. Thus, traders and investors say that the latest rise in price (which was immediately accompanied by an unrelenting plunge in stock prices) is a dead cat bounce.

The idea of dead cat bounces emerged from the notion that even dead cats bounce at least once when they fall from great heights. Thus, the principle is that no matter how market conditions are terrible and result in asset prices plummeting, there would still be a brief period where these prices rise a bit—and then continue falling.

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