This is the phenomenon that threatened to shake European markets
In a world Finance and investments Output Various terms to identify complex concepts Now, with the entry into force Definitions Trump, it seems that everything indicates that we will fail with them. Phenomenon ‘The dead cat is bounced“It is undoubtedly a concept that can make us laugh, but the reality is that this expression means Absolute volatility From the market.
Last Tuesday, April 8, European stock markets woke up clearly, which was completely far from the previous days of index. Monday and Black Friday. However, yesterday Red was wounded with bags again Fool It is located to 2 % in the case of IBEX 35Which exceeded 3 % in bags such as Milano, Paris and Frankfurt.
In this context, the phenomenon of “the recovery of the dead cat” that refers to it plays Temporary recovery after the crisis Back setback.
What does “Dead Cat Recovery” mean?
Société générale analysts suspect on Tuesday, when the stock market was opened, that the market recovery was “a simple recovery of cats”, an expression of that It defines a false counterattack that occurs in correcting the stock market. In a simpler phrase, what appeared to be a recovery on Tuesday, was in fact a temporary reduction before the price dropped on Wednesday with the definitions.
The term comes from the popular saying: “To a dead cat bounced if it fell from very high.”Which is what explains itself. Form Wong Sulong Y HoracE BragTwo of The Financial Times and they were first used in 1985, when the stock markets in Malaysia and Singapore passed the economic stagnation. This concept also works In politics To refer to a candidate or politician, after a scandal, he sees a recovery in his approval that collapses later.
Although the “dead cat” in this way saw the light in 1985, During the 29 crisis, something similar happened has already happened. At the beginning of 1930, there was a recovery after the fall of the market by approximately 50 % in the fall of 1929. This sudden increase led to a level of less than 20 % of the last peak, but at the speed it reached, it quickly collapsed. (89 % of the maximum). We know that the story and the market did not reach the maximum of 1930 to a quarter of a century.
Why produce the “recovery of the dead cat”?
The “dead cat” is a phenomenon It is completely involved in psychology. Sometimes, after a strong decrease, some investors believe that prices have touched the background and buying a rapid recovery. This can generate brief recovery. in case Trade warA rebound in the market can be generated with simple things like X Publish or word mediation. What has just happened with A 90 -day partial truce That benefit European markets.
“Recovery of the Dead Cat” Unknown Until the prices decrease to less than the level in which the reversal began. As he referred to a truce and action of Donald Trump, the bags are likely to be They start their healing little by little Even a new geopolitical movement changes its course, then, in the world of financing, everything can change completely overnight.
