May I suggest that there are 2 different types of Least Resistance…One being the structural supported, hard wired form such as rivers, streams and the other being more chaotic in nature. say a dew drop forming and slowly going down the window or the jet streams that bring the tornadoes and thunderstorms. Or perhaps the currents and cross currents in a river. These paths are much harder to predict than to describe in hindsight what happened.

It would further seem to me that if the markets do follow paths of least resistance that this is similar to the concept of drifts and trends. The long term drift is therefore more like structural patterns to the weather. The daily forecast is much harder to pinpoint. It may simply have one data point that tips the scale.

A few stats from the S&P concerning highs and lows, I looked at the 5 day rank of the Friday closes since Jan 2000. 1 being a 5 day high of the previous 4 day closes, and 5 being likewise a low.

Here is how it stacked up.

Rank   Count   percentage
 1          172    30.1
 2            88    15.4
 3            70    12.3
 4           101    17.7
 5           127    24.5

Using the other days of the week you find a very similar U shaped frequency distribution. There does appear to be a "trend" to the top or the bottom.

Gary Rogan writes:

I was just listening to Tim Pawlenty, and when asked about why the debt limit needs to be kept where it is he used the path of least resistance argument (which I have never heard before, but maybe now I'm more attuned). He said that politicians are like water and will follow the path of least resistance down, so the only way to combat this tendency is to create an obstacle in their path, making it the path of least resistance to not increase the debt.


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