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Dead Cat Bounce

'The name "dead cat bounce" is based on the notion that even a dead cat will bounce if it falls far enough and fast enough. It is an example of a sucker's rally. "

I thought cats always landed on their feet !

So my question, are the markets in a dead cat bounce ?

Have a good weekend, Derf

Comments

  • edited June 24
    Just a friendly reminder that getting back to break-even requires a greater degree of portfolio change than on the way down. Someone who’s down 20% YTD would need a 25% increase in portfolio value just to get back where they were. And if you’re unfortunate enough to be down 30%, it would require a greater than 40% increase to get back to break-even.

    To @Derf’s question. I think markets will meander lower in time. But who knows how long that will take? Things don’t normally move in straight lines. And I don’t invest based on predictions - mine or anyone else’s - although I listen to many points of view.
  • See %Loss, %Recovery chart & table here,
    https://ybbpersonalfinance.proboards.com/thread/296/loss-recovery

    If recession is not imminent (in 2022) but in 2023/24, it is possible that there may be a good relief rally with selloff resuming afterwards.
  • Some interesting ideas from one of my advisors

    20% declines not caused by electronic trading (1987) or Pandemic ( 2020)

    1970 down 35% Recovered 20 months later

    1973 down 48% rec 2114 days later !!!

    1982 down 26% rec 68 days

    2001 down 42% rec 1842

    2008 down 56% rec 1435 days

    1970 Recession driven with high inflation

    1973 high inflation but "misguided fiscal policies" prolonged decline

    1980s inflation surge ppt bear market Fed hiked rates

    2001 Tech bubble little inflation

    2008 housing bubble little inflation

    So if 1970 and 1982 are most applicable comparisons, we might be close to bottom, based on the decline, but neither started at 2022 valuations

    1/1/2022 23

    PE 16 at 1/1/1969 at start of the decline in 70s ( 30% cheaper to start than now)

    and 7 to 9 1/1/1981 to 1/1/1982


  • A missing piece is the rate environment and here is a chart from FRED for 10-yr Treasury yields since 1/2/1962. The P/Es are related to interest rates but there is no precise formula.
    https://fred.stlouisfed.org/graph/?g=QUFr
  • I'm thinking this damn cat is going to bounce a few times before it finally hits bottom, whenever that is. Throw in all the things that go along with inflation and rate hikes to compensate, house sales slowing down, rents increasing big time, energy costs, all causing the consumer step back with their buying... and now throw in the longer term negative effect on the economy from this abortion decision... The market low is no where in sight by my crystal ball.
  • Per the AAII report Yogi had posted, sentiment is very Bearish. These "dead cat bounces" are normal in a bear market.

    If you think 60% Bearishness is a contra-indicator, then maybe you believe this market has some strong upside from here. But not me. We could bounce a bit more, but we have been making lower lows and lower highs. That trend is still in place.

    The long list of open issues that the markets face in 2022 hasn't changed. Heck, it's been downright orderly so far.

    These next few Fed meetings alone are a big overhang.
  • edited June 24
    Hard to say
    Very close bottom but it bounces past 4 days
    Maybe another leg down to sp500 3540 or lowered before everything finished ...next cycle could be next wk.

    Good that inflation easing/natural gas down /UST also slowly easing/ oil demand likely ceased w recession and USA travel hopefully slow after july....maybe good for stocks because lessen demands

    Feds force us to buy stocks and shy away from energy UST/ commodities. Oil rsi and sp500 rsi almost equal. Look like sp500 bullheads held above Bonifacio level last 8 hrs/lots support

    Maybe good to nibble..we don't now if 15% from bottom or more but prices so cheap, we been nibbling, prob hold rest of 24 36 months
    Amazon, tsla, fedex, lcid, sp500 qqq - are the vehicles we bought earlier this wk...

    We will see next few wks

    -19% portfolio down now compared 28% 3 wks ago

    On side note we were suppose down 600 800 points Tues after uncle Powell give speech but only down little, could be bottom formation. Few more rate raise and stocks keep uptrends in 4 8 wks we think it maybe bottom...lots speculations.


    ****nobody knows nothing*** Buffett
  • edited June 24
    I know we're closer to the bottom that we were at the start of the year. Other than that, it depends on whether things are really broken or in only in need of a major tune up. I am currently doing a little tax loss trading and dribbling a few new dollars into stocks. But, not too many. The stock % in my portfolio is about what it was at the start of the year due to non-stock losses that have accompanied stock losses. This quote describes some of reasons for the current market uncertainties....
    “The disinflationary forces of the last quarter-century have been replaced, at least temporarily, by a whole different set of forces,” Jerome H. Powell, the Fed chair, said during Senate testimony on Wednesday. “The real question is: How long will this new set of forces be sustained? We can’t know that. But in the meantime, our job is to find maximum employment and price stability in this new economy."
  • davfor said:

    I know we're closer to the bottom that we were at the start of the year. Other than that, it depends on whether things are really broken or in only in need of a major tune up. I am currently doing a little tax loss trading and dribbling a few new dollars into stocks. But, not too many. The stock % in my portfolio is about what it was at the start of the year due to non-stock losses that have accompanied stock losses. This quote describes some of reasons for the current market uncertainties....

    “The disinflationary forces of the last quarter-century have been replaced, at least temporarily, by a whole different set of forces,” Jerome H. Powell, the Fed chair, said during Senate testimony on Wednesday. “The real question is: How long will this new set of forces be sustained? We can’t know that. But in the meantime, our job is to find maximum employment and price stability in this new economy."
    I'm hanging on to my junk bonds TUHYX. And the bonds held elsewhere, like PRWCX and BRUFX. I'm heavier in stocks now, lighter in bonds. I exited PRFRX today and dumped all that into TRP Equity Income. PRFDX. It's full of the stocks I LOVE to HATE. But hell, you can't fight city hall. My single-stocks went on a rampage today. RGR. ET. BHB. And BHB just approved a stock buy-back plan: 5% of outstanding shares. At the moment: 73 stocks, 20 bonds.

    Of course, because this is ME, I made this change on just exactly the WRONG day. ORK!
  • Lowest sentiment since '58 ! Time to add some $$ to accounts I'm thinking. Where to put it is the net question. Commodities took a hit last week, but YTD a high riser I'm guessing ?
    Think I'll see if I can find a good beaten-up MF (-20%) & get a starter position.
    Anyone care to throw out an idea , you won't be held responsible if it's a dumper.

    Have a dry weekend, Derf
  • If you want to take a winger on the worst-of-the-worst, @derf, SCG is bringing up the rear. BCSIX, is a previous winner that holds almost all tech and healthcare. It’s closed at present. You could look at DVSMX and NEAGX. These three differ in the sectors represented in their portfolios, so they are not exactly comparable. NEAGX has handled the market downturn much better than the other two. Other members probably have more sedate suggestions that would work.
  • edited June 25
    “Stay dry” and “invest in a beaten-up fund” would appear to be an oxymoron.

    Barron’s this week is pounding the dumb for home builders - again. Wouldn’t be my choice. ARKK is up 18+% past two weeks or I might have suggested that.

    No suggestions. Sorry. Enjoyed reading Ben’s comment.

    @Derf - Minor suggestion here. Whenever I feel inclined to go dumpster diving (I don’t currently) I Google “T Rowe Price Historical Performance” (Unfortunately it doesn't link very well). Should pull up 100+ TRP funds with performance numbers. Many stink real good this year. Of course, there are equally good or better sites. But that’s the one I look at.
  • Not sure if the market has reached the bottom. Certainly don't want confirmations biases from pundits. Several things to think about:

    1. What will the earnings look like in the upcoming reporting season? Better or not?
    2. Has inflation peaked and the CPI starts to decline?
    3. Will unemployment stay low indicating tight labor market?
    4. Have supply chain issues gradually improved so to improve the inflation pressure?

    For now I am staying largely on the sideline with high % cash.
  • @Derf. Maybe look at PRWAX.
  • +1 hank I invested in ITB and XHB on 4/4/2022, out of curiosity, after that first Barron's article came out. The two etfs are down between 11.5% and 13% after my purchase, but I invested only $100 in each.
  • From red to green over night ! Bring it on !
    Good Monday to all, Derf
  • @Derf - Here’s a somber reminder that not all cats can bounce.

    https://tenor.com/view/dead-cat-cpr-funny-animals-cute-revive-gif-13712625
  • Late last week uptick is more like relief rally. Everything is down again on Monday. Listened to @hank’s Wall Street Week posting again. This year will be not be easy to get back to positive territory given that S&P 500 is down 18% and total bond index is down 11%. Earning season is coming in July.
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