Friday, June 08, 2007
velocity of the change and the dead cat bounce
The market appears to have entered a short term corrective phase, the trick here is to focus on the velocity of the change, If the market sell off fast and furious, the rebound will be of equal magnitude, but if this sell down turns into a slow rolling sell down incomplete in nature and low volume like many of the sell downs in the last several years this could get ugly. Again the two key elements to playing this thing are the velocity of the down turns another words how far how fast and climactic volume which would signal the bottom. Remember that an incomplete sell off could lead to further down side ,so if we get a short term rally but the volume isn’t there be wary ,the correction isn’t over . In the business this is known as the “dead cat bounce” Usually the market sells off for a time with the volume building till finally we have a day were the market hits a new low then rallies under heavy volume, commonly referred to as the big reversal.