Monday, May 21, 2012

Market Sees Bounce While Facebook is Rejected

Dead Cat Bounce?

Yes. Dead cat bounce. I'll quote it again: "Even a dead cat bounces when it falls from a high place." My oscillator was showing some extremely oversold areas after last week ended. Of course, the word over the weekend was "oversold," but no one knew when it this bounce was likely to occur. I didn't either.

But the market bounced today. SPY 1.72% and Dow Jones is up 135 points. Furthermore, VXX slid 11%. However, let me remind you that the volume on these tremendous bounces were slightly higher than average.

My oscillator is still reading "oversold" as of today's closing. Therefore, we'll probably see some more bouncing on average volume before this market continues heading lower. Yes, I still think that the entire market is due to head lower. The news coming from Greece is still not good. In addition, France and Germany have their own problems, so in my opinion, this market correction is still not quite over yet.


A hefty $104 billion dollar valuation clearly left this stock scarred today. After dipping 11%, it is clear that investors are not supporting the $38 dollar price and the extreme valuation. The market cap for FB is still 72 billion dollars, which in my opinion is still a little overvalued. From my point of view, the investment bankers that ushered this IPO seemed to have factored in the future "prospects" of revenue rather than current revenue. Sure enough, investors do not seem to agree. And why should they? Investors would much rather invest in a good pick right now and wait for the future prospects to come into play than to bet on these future prospects and risk their capital.

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