The highest probable cause of tach needle bouncing is the ignition coil. The tachometer gets its input from the primary side of the coil. Every time the coil primary collapses, it fires the coil. Then, based on the engine cylinder numbers programmed into the tachometer, the gauge will register rpms. If the coil has a building high resistance in the primary side, or there is a poor connection, then the gauge gets an incorrect reading and will "bounce" all around, even if the engine is running normally. This condition is more prominent when the engine is warm, or the rpms are higher than 2500-3000.
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"It is not that I have failed, but that I have found 10,000 ways that it DOESN'T work!" --Thomas Edison
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