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 bear market rally market participants price in many different types of events such as the release of a company s quarterly earnings report election results interest rate changes and new industry 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 rallya 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 stocks 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 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 short covering this is done as short 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 market volatility as investors may panic and make judgment errors regarding their holdings identifying a relief rally can be challenging even for experienced traders in many cases such a rally can last for weeks or even months before the continuation of a longer term downward trend special considerationsa relief rally does not necessarily spell the end of a secular decline however both the aftermath of the dotcom bubble and the 2007 2008 financial crisis saw several relief rallies for stocks only to see renewed fears push market prices lower again sharp relief rallies that occur in otherwise bearish markets are sometimes called a dead cat bounce or 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 continuing soon after 