"Dead cat bounce" is the gruesome phrase used by investors to describe a brief rally that occurs during an overall bear market. As you might suspect, it's based on the observation that even a dead cat cat may bounce if dropped from a sufficient height.
Wall Street markets have been rallying, even since they reached a low point less than two weeks ago, on March 9. Everyone wants to know how long the rally will last.
During the period 1929-1932, the Wall Street markets fell 90%. However, during that four year period, there were several substantial rallies. Here's a list of them:
Start End Duration Size of market increase
--------------- --------------- --------- -----------------------
Nov 1929 April 1930 5 months 49%
June 1930 September 1930 3 months 16%
December 1930 February 1931 2 months 25%
June 1931 July 1931 1 month 29%
October 1931 November 1931 1 month 35%
January 1932 March 1932 2 months 25%
--------------- --------------- ---------- ----
AVERAGE 2 months 30%
So the market didn't fall steadily from 1929 to 1932. There were several rallies, one as long as 5 months. The average length of these rallies was 2 months.
Moving back to today, the market has fallen almost 50% since it peaked in October, 2007. During that time, there have been several rallies (I've updated the last line to the current date):
Start End Duration Size of market increase
--------------- --------------- --------- -----------------------
26-Oct-07 10-Dec-07 45 days 8%
10-Mar-08 16-May-08 67 days 12%
15-Jul-08 11-Aug-08 27 days 7%
27-Oct-08 4-Nov-08 8 days 18%
20-Nov-08 6-Jan-09 47 days 24%
09-Mar-09 19-Mar-09 10 days 16%
--------------- --------------- ---------- ----
AVERAGE 34 days 14%
So for those of you wondering how long this dead cat bounce will last, it might be over already, or it might last several more weeks. We won't know until after it's over.
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