Have you ever heard the expression “Dead-Cat Bounce”?

You may have heard a talking head say on TV that a rally in a stock, currency or commodity is just a “dead cat bounce” and wondered what they were talking about.

Today’s rally in global stock markets (Dow up 400 points as of this writing) is a perfect example of a dead-cat bounce. While the stock markets of the world are falling due to the European debt crisis, this is a relief rally which fools some investors into thinking that the 1,000 point fall in the Dow last Thursday was just an abberation, a black swan or some “fat-finger” mistake.

The expression comes from the idea that even a dead cat will bounce a little bit when thrown from a building. That’s a tough image to conjure if you’re a cat lover, but it explains the expression well. The underlying financial instrument (stock, bond, etc.) being bought and sold in the market may be going up, but the expression implies that it won’t last for long and will resume a downward path very soon.

Please note that although many investors will lose money from dead-cat bounces, no cats were harmed in the writing of this article or in making the photo above.