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Don’t let today’s software rally improve your mood

The tech-heavy Nasdaq Composite index rose 3.4% today, while other major U.S. indices jumped smaller amounts in a hall-of-fame start to the trading week. (That the markets are turning up for Disrupt is rather kind, I must admit.) Even more important to the tech industry, however, is sector-specific news. Observe: Software/cloud companies: As measured by the Bessemer Cloud Index, shares of these companies are up 5.8% today. Fintech: As measured by the ARK Fintech Innovation ETF, shares of these companies rose 7.4% today. Good news? Sure, but only if you are into squashy cats. Let me explain. When the value of a particular commodity or security falls sharply, it often follows up its declines by bouncing back a little. If the underlying forces that drove the security negative remain in place, such rebounds often prove short-lived, and not indicative of the actual “bottom” of any particular trading range. This is often called, somewhat inartfully, a “dead cat bounce,” or more specifically, the sort of modest rebound that a cat’s corpse might manage if it hit concrete after falling from a high window.

Don’t let today’s software rally improve your mood by Alex Wilhelm originally published on TechCrunch


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