THE PHYSICS CONNECTION
Why Fluid Dynamics?
The Navier-Stokes equations — named for Claude-Louis Navier and George Gabriel Stokes — describe how fluids move through space over time. They have been used to model everything from ocean currents to airflow over jet wings. The key insight they offer is a way to characterize the state of a flow: is it organized and directional (laminar), or chaotic and unpredictable (turbulent)?
Stock markets exhibit the same dichotomy. During trending regimes, price momentum is directional and systematic — a high-scoring stock is likely to keep moving in the same direction. During volatile, turbulent regimes, momentum signals break down and the market becomes noise-dominated. The fluid dynamics framework gives us a rigorous language and a measurable threshold for distinguishing between the two states.
"The Reynolds number in fluid dynamics predicts when laminar flow tips into turbulence. Our market Reynolds number does the same thing — it's a quantitative regime signal, not an opinion."
THE SCORING SYSTEM
How Stocks Are Ranked
Every stock in the model's coverage universe is scored daily on a proprietary composite of momentum and quality factors — each drawn from a fluid dynamics analog. The physics framework isn't cosmetic: it provides a mathematically grounded structure for measuring how price energy moves through a stock over time, and whether that energy is organized or degrading.
Momentum characteristics drive the primary score. Quality characteristics — which vary by risk profile — act as a construction filter. Together, they produce a single composite rank. The model doesn't pick stocks. It ranks them, continuously, and builds portfolios from that rank.
"Every factor has a physics counterpart. The analogy isn't decorative — it's the architecture."
REGIME DETECTION
The Reynolds Number — Market State in One Number
In fluid dynamics, the Reynolds number (Re) predicts whether a flow is laminar or turbulent. It's calculated from the fluid's velocity, density, and viscosity relative to its container. In our model, we compute an analogous market Reynolds number from a proprietary combination of market-wide signals that measure the same underlying quality: is price energy flowing in an organized direction, or is the system becoming chaotic?
CURRENT MARKET RE — ILLUSTRATIVE
When Re is below 300, the model runs in its standard configuration — momentum scores drive construction and the growth sleeve (if selected) operates at full allocation. When Re crosses 300, the model automatically tightens its filters, applies turbulence adjustments across the portfolio, and reduces tactical exposure in the sleeve. The model doesn't exit the market. It adapts.
PORTFOLIO CONSTRUCTION
From Scores to Portfolios — The RA Framework
Scores become portfolios through the risk profile layer. There are ten profiles — RA1 through RA10 — ranging from Maximum Aggressive to Capital Preservation. Each profile has its own construction parameters that the model applies to the same underlying score rankings: position sizing, diversification requirements, quality thresholds, and volatility constraints all scale with the risk level.
Aggressive profiles lean into momentum with concentrated positioning and minimal quality filtering. Conservative profiles prioritize stability, income quality, and drawdown control. Every profile, regardless of risk level, is built from the same systematic scoring engine — the difference is how the construction layer interprets and filters those scores.
"The model doesn't have ten different personalities. It has one engine and ten different lenses."
Rebalancing is signal-driven, not calendar-driven. The model flags a swap when the case for replacement is strong enough to clear the friction of a trade. Construction details are disclosed to clients upon engagement.
THE GROWTH SLEEVE
Optional 15% Tactical Allocation
For RA1–RA7 profiles, clients can elect a 15% Growth Sleeve on top of their core portfolio. This carves out 15% of the total allocation for 3–5 of the model's highest-conviction positions in the current regime — typically the top-ranked names by composite score with no quality floor restrictions.
The sleeve operates independently of the core: it can hold names that wouldn't qualify for the core portfolio (e.g., a high-momentum stock that fails the RA6 quality filter). It's a deliberate, bounded expression of higher conviction — not noise.
When Re crosses 300, the sleeve automatically reduces exposure. The 3–5 positions are trimmed, proceeds move to cash or equivalents within the sleeve allocation, and the sleeve stays dormant until Re returns below 300. You don't manage this — the model does.
The sleeve is best suited for investors who are comfortable with their RA profile for the bulk of their portfolio but want the model to take targeted, high-conviction positions with a bounded portion. It is not appropriate for RA8–RA10 — the capital preservation mandate and the tactical sleeve's risk profile are incompatible.
VALIDATION
Regatta — Every Change Races Before It Ships
A systematic model is only as trustworthy as its change-control process. Ours is called Regatta: before any modification to NavierFlow — a new signal, an adjusted threshold, a construction rule — reaches a client portfolio, it must race the current model side by side across historical market regimes and all ten RA profiles.
A candidate change is promoted only if it improves risk-adjusted behavior without degrading any single profile. A tweak that flatters RA1 in bull markets but bruises RA9 in drawdowns is rejected, full stop. Most candidates lose their race — which is exactly the point. The model you're invested in is the one that survived the trials, not the newest idea we had on a Tuesday.
When a change is promoted, we say so in The Current: what changed, why, and what it means for your profile. Showing the work applies to the model itself, not just its output.