Tuesday, August 9, 2011

A Dead Cat Bounce?

Imagine standing on your garage, holding a dead cat, which you then toss onto the driveway.  It will likely hit the concrete and bounce up slightly.  That does not mean the cat is alive.  It just means the dead cat bounced.

That tasteless old Wall Street adage describes that situation where the market is dead but suddenly bounces up . . . like today.

So, is today's positive opening a dead cat bounce?  I don't think so.  The last twelve days have been remarkable and rare.  If we saw the market bounce up as much as it declined, we would be saying this is not sustainable, and we should sell.  I actually did a little buying this morning.

Also this morning, I met with a representative of Goldman Sachs, whose research capabilities I respect, who still expects the S&P to end the year at 1400 or up a whopping 23% from here!  They believe this is a correction, not a collapse.

I think they are right.