What Is a Relief Rally?

A relief rally is a respite from a broader market sell-off that results in temporarily higher securities prices. Relief rallies often occur when anticipated negative news winds up being positive or less severe than expected. A relief rally is one type of 澳洲幸运5官方开奖结果体彩网:bear market rally.

Market participants price in many different types of events, such as the release of a company's 澳洲幸运5官方开奖结果体彩网:quarterly earnings report, election results, interest rate changes, and new ind🍬ust🦩ry regulations. Any of these events can trigger a relief rally when the news is not as bad as expected. Relief rallies happen in many different asset classes such as stocks, bonds, and commodities.

Understanding a Relief Rally

A relief rally often happens amid a secular decline in the market or persistent selling pressure that lasts for multiple days. Relief rallies happen for individual stocks, as well. Slightly better-than-expected financial results sometimes ignite relief rallies for beaten-down stock♊s with a long history of missing analyst expectations for many quarters.

Sometimes, even a lower-than-expected loss can ignite a relief rally, or they might be triggered by a more positive tone on a company 澳洲幸运5官方开奖结果体彩网:conference call with analysts. Part of the reason is that slightly good news sometimes causes short sellers to buy stock to cover their positions, which can trigger a 澳洲幸运5官方开奖结果体彩网:short covering. This is done as shor꧃♈t-sellers look to avoid further losses as prices rise.

Because bear markets last for long periods of time, they can exact an emotional drain on investors hoping for a market turnaround—hence the "relief" when signs of a bounce appear. Market advisors warn against emotional responses to 澳洲幸运5官方开奖结果体彩网:market volatility, as invest🐷ors may panic and make judgment errors regarding their holdings.

Special Considerations

A relief rally does not necessarily spell the end of a secular decline, however. Both the aftermath of the dotcom bubble and the 澳洲幸运5官方开奖结果体彩网:2007–2008 financial crisis saw several relief rallies for stocks, only to see renewed fears push market prices𝄹 lꦗower again.

Sharp relief rallies that occur in otherwise bearish markets are sometimes called a 澳洲幸运5官方开奖结果体彩网:dead cat bounce or 澳洲幸运5官方开奖结果体彩网:sucker's rally. This type of rally may fool some into thinking there is a reversal in the trend, only to find the bear market continuℱing soon after.