Jun

19

 This article "scientists find achilles heel of antibiotic resistant bacteria" discusses a potential breakthrough in combatting antibiotic resistant bacteria. Apparently some of these organisms build up a 'wall' that becomes impenetrable to known drugs.

One wonders if a similar phenomenon occurs every day in markets at the low and high price. Considering just the low — perhaps as price goes lower the market builds up more and more resistance to the selling, with the conditionality thus created in the data thus leading to greater and greater future expected returns for a given holding period, say, into the close at which point the market price once again becomes subject to buying and selling pressures.

A touch further down this track and one might consider a 'Palindromic Reflexive' relationship between increasingly ineffective selling and rising market 'antibiotic resistance' to said selling.

One readily accessible test is to use 'risk reversals' as the 'antibiotic resistance' factor and price acceleration/ deceleration as the other factor. If, for example, the risk reversal developed a skew towards put options over call options and the price continued down and the RR skewed more etc in a 'reflexive' fashion…. but then all of a sudden the risk reversal stabilised while the price kept going down then that would be a potential sign of 'resistance' to downward price movement that may signal future reversal….. There may be a potential reversal approach somewhere within.

HDAS Capital writes: 

When looking at the wall building process of price discovery, it's useful to take out the microscope and see (count) what the "bacteria" is doing. Is it canceling orders at greater rate than trades per price level? Does it take longer to trade through the bid or the offer? And what happens to the next price in the sequence?


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