Customer Service 1 (888) 261-2693
Advanced Search

The Proper Way to Juggle Dead Cats

By Jeff Clark
Thursday, January 8, 2009

We couldn't have scripted it better.
 
Last month, we took a look at the dollar, decided it was ready to fall, and bet stocks and commodities would rally. That's exactly what happened.
 
From top to bottom, the U.S. Dollar Index dropped 12%. The S&P 500 gained as much as 13%. Gold was up 17%. And oil rallied 15%.
 
Now, however, the dollar is showing some strength while stocks and commodities are acting tired. This action, of course, begs the question, "Is that all there is? Or can we squeeze a little more of a rally out of the stock market before the bear takes another swipe at it?"
 
Here's where it pays to know a little bit about dead cats...
 
You see, on Wall Street, "dead cat bounce" is an old phrase used to describe the action in a beaten-down stock. The thinking is, if you tossed a dead cat off the top of the Empire State Building, it would bounce when it hit the ground. Then it would drop back down and hit the ground again.
 
Applying this phrase to the stock market, the term "dead cat bounce" indicates the action of a stock that has fallen from lofty levels, hit bottom, and then bounced sharply. Eventually, the stock will fall back down and hit bottom again.
 
To me, the action in the U.S. dollar looks like a dead cat bounce...
 
 
 
So the greenback ought to fall back down to last month's lows, or perhaps a bit farther. And that should be enough to reignite another rally in stocks and commodities for at least the next month or two.
 
Of course, you could argue that the action in just about every asset class resembles that of a dead cat bounce. You'd be right. Indeed, trying to trade this market is like trying to juggle a bunch of dead cats.
 
Actually, it's more like watching someone else juggle them. Then wagering on which one will drop first.
 
I'll bet the dollar hits the ground first – which means the other cats ought to stay airborne a while longer.
 
Best regards and good trading,
 
Jeff Clark




Recent Articles
Market Notes
Oil drops 8% yesterday... back below $45.
 
Low oil prices help airline JetBlue hit 52-week high... up 141% since last July.
 
Leading hospital bed manufacturer Hill-Rom hits lowest point since April 2008 spinoff.
 
Earnings today... Apollo Group, Chevron, Shaw Group.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1224.71 +0.3% +11.4%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.19 -0.6% +7.2%
Euro 1.34 +1.4% -11.0%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%