What's happening with the DJIA today is a classic example of a "dead cat bounce"

[cali]

From Wiki:

A dead cat bounce is a 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".

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 thus making 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 is a true dead cat bounce. If the market starts to climb again, it was not a bounce but a bottoming out, but in hindsight the distinction also depends on the initial and final reference frame
http://en.wikipedia.org/wiki/Dead_cat_bounce

[RUMMYisFROSTED]

1. We'll know tomorrow.

[Warpy]

2. Yesterday was blind panic. Today is bargain hunting

Blind panic is always a bad idea. People who sold toward the end of the day will have cause to regret it.

The market will be one step forward, two steps back until the economy is put on a more rational footing. In addition, equities have been overvalued for the past 10 years. The paper numbers might have been nice, but they weren't any more real than that bogus paper from hedge funds infecting bank balance sheets.

[cali]

5. I don't think today is primarily about bargain hunting

on any kind of substantial scale, but we'll see. I agree that the market will continue to sink.

[wtmusic]

3. So you already have the benefit of hindsight

and have shorted your entire portfolio? Lucky you.

[Kurt_and_Hunter]

4. It is a short-term trading opportunity

The CW is that some bill will be passed very soon. There are a lot of negative bets out to be cleared and a generally oversold market so I think folks are covering shorts and buying to catch a bill-passage bounce, at which point they will sell into the rally.

(The rules changes barred new short positions on financials, but there are massive shorts outstanding.)

A trading phenomenon, rather than an investing phenomenon.

That's my guess.

(Not in any way a contradiction of the OP, just offering my theory of which kind of dead cat bounce it is.)

[kenny blankenship]

6. 630 billion in liquidity from the Fed yesterday. It's impossible that a good chunk of it

wouldn't find its way to the stock market for quick turnaround trades after the largest point drop in history. Freshly supplied with Bernanke bucks I buy the Dow after the plunge, you see me buy and come back to the Dow. You bring your friend and he buys. I sell and pocket the quick buck.

[On the Road]

7. It is Probably Not the Bottom

Although volume did look surprisingly good this morning.