Tuesday, April 08, 2014

Due for a dead-cat bounce?

Yeah, the further decline of NASDAQ on Monday was a disappointment, but the good news is that there was a moderate bounce off the low for the day, suggesting that the short-term bearish speculators may indeed be running out of steam. They can't follow that same pattern for too long before those of them sitting on significant profits from the recent decline start to reverse and start betting on a bounce.
 
Sure, any initial bounce can be a traditional dead-cat bounce, but once again you can't have too many of them before the bearish speculators start to lose their enthusiasm and seek to protect their profits, and to begin to bet even more on a bounce.
 
In short, sure, there could be a bit more weakness, but absent any dramatic weakness in the economic outlook, a solid bounce is due within relatively short order.
 
-- Jack Krupansky

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