Sentiment Compression and Explosive Repricing Events: Why the Market Sleeps Until It Suddenly Punches Everyone in the Face
If there's one thing the stock market has taught me, it's that human beings are terrible at gradual thinking. We understand explosions. We understand panic. We understand euphoria. What we don't understand very well is pressure. Pressure building. Pressure accumulating. Pressure hiding beneath the surface while everyone insists nothing is happening. Then one day the market moves 20%, 30%, or 50% seemingly out of nowhere, and financial television responds the same way a man responds after sitting on a rake in a cartoon. Total surprise. Complete confusion. Instant analysis from people who didn't see it coming. And that's where sentiment compression enters the story. It's one of the most fascinating concepts in investing because it explains why markets can remain irrationally calm for months—or even years—before repricing with shocking speed. The funny thing is that the repricing event itself isn't usually the story. The story is the compression ...