Some radical thoughts and perspectives for radical times.. another view on why we ain't flying.
This morning I was thinking of Bernouli's Principle and the market. A plane passed overhead and I imagined the airflow over its wings, the air above having much greater velocity than the air below.. which creates a vacuum that draws the plane up, which is why it can fly. The velocity of money might be the same thing for rising prices, the faster it moves above a price, the more lift a stock has... hmmmm.
Normally, patterns common to a rising market, are a runup into earnings, especially for strong stocks. About a week before they report, after the early worry factor ebbs, the price flattens and some optimists begin to collect shares. We saw that with CSCO and Dell, there were even some upgrades.
But very consistently over the last two months.. those optimistic buys have collapsed during conference calls with even the slightest hint of future slowdown or relaxing of intense growth predictions. Even the companies that are reporting they're overbooked, sold out, rising profits and revenues.. they've been hit hard. In other words, nearly every tech stock has fallen into the tar pits of despair, whether they warrent it or not. There's turbulence spoiling lift.
Good news is currently an opportunity to sell, bad news is an opportunity to sell. CSCO had great numbers and their forward bias is great, DELL's growth for a company its size is excellent. Something must be going on underneath the surface to support this negative behavior. Money is being made on the downside, that's where the velocity is.
Soon the vacuum of opportunity will be stronger for stocks to move up instead of down. The velocity of money will increase above stock prices, creating a vacuum pulling us out of this nose dive. Prices will get sucked up into the vacuum the same way an airplane flys.
Here's a good note with an audio wav on Bernouli's Principle:
instruction.ferris.edu
Enjoy.. Jim |
