When all you read is gloom, turn here for a much different perspective.

Monday, September 14, 2009

Newton's Third Law and The Dow's Epic Rise

"For every action, there is an equal and opposite reaction."

Newton's statement implies that in every interaction, there is a pair of forces acting on the two interacting systems. The size of the forces on the first system equals the size of the force on the second system. The direction of the force on the first system is opposite to the direction of the force on the second system. Forces always come in pairs - equal and opposite action-reaction force pairs.

Last September 29th the Dow Jones Index posted its biggest point-drop ever. The drop wiped out $1.2 trillion in market value with the index slumping over 777 points, in the biggest single-day point loss ever.

But almost a year later the markets are up over 50% from their 2008 lows. And there is likely a lot more room for the markets to run even higher.

If one closely analyzes Sir Isaac's third law of motion and a simple stock chart for the last year, it does not seem far fetched that the market could be poised for a very significant leg up.

(click to enlarge) (Source: Google Finance)

1 comment:

  1. GNE, ... one more vicious leg up is not out of the question in my view. But i think to really set ourselves up for it the current now-mini correction needs to become more severe and scary. Let hedgies get confident and start shorting everything, scare out some "weak hands" and then begin anew and make a run towards 1200 on the S&P.

    Q4 earnings should be hugely better year over year, which will make for some good comparisons and should spark a move to the upside in equities.

    I've gotten much more bullish in the last 3 days, but I do think we need the current correction to get actually painful...


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