Hi -

Does anyone know what is the origin of the phrase "dead cat bounce" ?

This fiscal term is used frequently, however I always wondered the origin of this phrase was - & whether it is a general term or if it refers to just a specific thing.

Thanks,
- Nick

According to Wikipedia:

A dead cat bounce is a figurative term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".

The phrase has been used on the trading floors for many years. However the earliest recorded use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. Journalist Christopher Sherwell of the Financial Times reported a stock broker as saying the market rise was a "dead cat bounce". It has also been used in reference to political polling numbers.

The reasons for such a bounce can be technical, as investors may have standing orders to buy shorted stocks if they fall below a certain level or to cover certain option positions. Once those limits are reached, the buy orders are activated and the sudden rise in demand causes the price of the stock to rise as well. The bounce may also be the result of speculation. Since bounces often occur, traders buy into what they hope is the bottom of the market, expecting a bounce and thereby reaping a quick profit. Thus, the very act of anticipating a bounce can create and magnify it.

A market rise after a sharp fall can only really be seen to be a "dead cat bounce" with the benefit of hindsight. If the stock starts to fall again in the following days and weeks, then it was a true dead cat bounce. If the market starts to climb again after the first short bounce, then the continued rise in price action would be considered a trend reversal and not a dead cat bounce. Since this distinction only becomes obvious in hindsight, the evaluation may vary depending upon the initial and final points of reference.

A grain mill operator named Don Pilegard is the first person I have ever heard use the term "dead cat bounce." I was a stock broker, at the time, and he was a customer.

In about 1983 Don was asking me about the recovery prospects of a stock that had recently had a large decline.
I recalled the image from a short story I had read, "Sailcats" about a guy who tossed cats that had been flattened after being run over by trucks on a highway, from bridges, kind of like a Frisbee.

I answered him in a joking manner, " even a dead cat will bounce if it falls far enough! "

From then on he would jokingly ask about a stock that had fallen, "Is it due for a dead cat bounce?"

Since Don was on the telephone everyday, talking with grain traders from around the country, not to mention he had multiple brokerage accounts. I am sure he spread the term.

The earliest printed use of the term dates to 1985 in the brokerage community.