I doubt that a bad cable would make the needle bounce, unless it was binding up and winding up inside the tube and then letting go. If the needle bounces, it usually means that there is dirt/oil inside the drum inside the speedo unit (if it does it regularly) or there is a bad bearing on the drum or magnet if it only does it when you hit a bump.
Check out eddy current speedometer at to see how it works:
Howstuffworks "How Speedometers Work"
Check out eddy current speedometer at to see how it works:
Howstuffworks "How Speedometers Work"