Sorry to resurrect a dead thread but, I'd be interested to know the reason for this "bounce" in the depth reading. My first N2ition3 displayed this behaviour as well, and would get more "bouncy" the greater the depth.
My dive shop owner was very gracious when he dove the DC twice, and decided that it should not do this, also it displayed a depth reading 10ft deeper than actual. Twice the computer went into altitude mode with a rank of "2" while actually at ~sea-level. It was returned with about 14dives on it.
My second N2ition3 also displays this behavious (however, no altitude mode yet). This past weekend, at 90 ft, I was getting "bounces" of up to +-8ft. Which also meant that I was getting ascent rate warnings at every other depth reading. I even got an ascent rate warning while descending. My two deep dives were dive #2 and #3 on the new DC. To check if it was a cold water issue, I left the computer at the bottom of my pool while I swam around and had fun. The pool depth is 9ft and readings never went past 9 ft, but regularly dropped to 8ft, and even 6ft. Trust me, the bottom of my pool is concrete, and doesn't change depth willy nilly. My pool is also 82F (the DC and my thermometer are in agreement on the temperature), so the cold water theory is out.