Dead Cat Bounce?

I love Wall Street if for no other reason than the sayings that come out of there.  “A Dead Cat Bounce” is used when a stock or index has fallen hard and then has a short lived bounce or up tick before coming back down.  Basically it means that even if a cat is dead weight and you drop it, you stand a chance to see it come off the ground again before settling back to being a lump of inactivity. Colorful, huh?

Today could be a dead cat bounce for the markets as the futures are up pretty good this morning.  We had a dead cat bounce yesterday as the DJIA bounced off its lows only to come falling back with the pull of gravity.  I’m cautious of today’s upside move and will remain so until we have more than a few days of it.

I don’t feel the need to catch the exact bottom of a market as much as be sure I’ve preserved capital as much as possible.  Selling naked puts doesn’t require exact timing as much as day trading does.  Close counts in selling options too, although not as much as it does in horse shoes or hand grenades.

Another of my favorite sayings is “Don’t Catch a Falling Knife”.  If you’ve ever actually dropped a sharp knife and tried to catch it before it hits the ground you know how painful those blades can be across your fingers and likely won’t try it again.  The analogy is often used on stocks that are falling.  You stand a better chance of profiting if you let the stock (aka knife) bottom out and settle before trying to buy just before the bottom.  It’s easier and safer to wash off the knife and start over than risk cutting yourself, even if you might be delusional enough to think you have the skills to catch it safely.  Try it often enough and you’ll bleed badly.

I made an edit at the bottom of my DJIA chart from this weekend and later realized that many readers won’t be doubling back to see the change.  What I noticed was that if the DJIA drops to 12,852 we will have reached another correction.  That’s 10% down from its high.  When we hit that 10% point intraday in August, we rebounded huge within a few minutes.  We’re only ~150 points from that point now.  Maybe that’s when the knife will stop falling and the dead cat ceases to bounce.

What other good sayings/cliches do you like from Wall Street?