Traders have a grim saying for a temporary recovery in a crashing market: “Even a dead cat will bounce if you drop it from high enough.” As Bitcoin hovers around $91,212 after its massive fall, and gold attempts to stabilize at $4,033, analysts are debating whether we are seeing a bottom or just a pause before the next plunge.
The bearish case, supported by JP Morgan’s Daniel Pinto, is that a deeper correction is “probable.” The fundamental drivers of the sell-off—high interest rates and an AI valuation bubble—have not changed. A small uptick in prices might simply be short sellers covering their positions rather than genuine buying interest.
The bullish case, championed by UBS regarding gold, is that the sell-off is overdone. They argue that the underlying demand from central banks and the eventual inevitability of rate cuts will lift markets back up.
However, the “irrationality” warning from Google’s CEO looms large. If the market was truly irrational on the way up, it has a long way to fall to become rational again. A dead cat bounce traps optimistic investors who buy too early, only to suffer when the decline resumes.
With the FTSE 100 down four days in a row, the momentum is clearly downwards. Investors are advised to exercise extreme caution. Trying to catch the bottom in a market dominated by “Extreme Fear” is a dangerous game.