“Dead cat bounce” is a term used in investing and trading to describe a temporary and short-lived recovery or rally in the price of a declining asset, particularly stocks or securities. The phrase suggests that even a dead cat will bounce if it falls from a great height, but the bounce is only a momentary and ultimately insignificant event. In the context of financial markets, a dead cat bounce implies that a brief upward movement in the price of a declining asset is unlikely to be a sustainable reversal of the overall downtrend.

Key characteristics of a dead cat bounce include:

1. **Temporary Recovery:** It is a short-term and often sharp increase in the price of an asset that has been experiencing a significant decline.

2. **Bear Market Context:** Dead cat bounces typically occur within the context of a bear market, where prices have been falling over an extended period.

3. **Limited Reversal:** Despite the brief upward movement, a dead cat bounce is generally seen as a temporary interruption in the prevailing downtrend rather than a genuine reversal of the market sentiment.

4. **Low Volume:** The rally during a dead cat bounce may be accompanied by lower trading volumes, indicating a lack of widespread investor conviction in the upward movement.

5. **Technical Analysis Signals:** Traders often use technical analysis indicators, such as moving averages, to identify potential dead cat bounces. The goal is to distinguish between temporary price movements and more sustained trend reversals.

It’s important for investors and traders to exercise caution when encountering a dead cat bounce. While the temporary recovery might create a sense of optimism, it can be followed by a resumption of the overall downtrend. Investors should conduct thorough research, analyze market conditions, and use risk management strategies to navigate potential market reversals.

The term is colloquial and is used metaphorically rather than as a precise technical indicator. It highlights the idea that not all price movements, even if positive in the short term, signify a lasting change in market dynamics.