The b/a is irrelevant. It tells you nothing. What tells you something is what people do, not what they might do. In everything I've said so far I have assumed you knew what the four atomic states were, plus tick(+), zero plus tick(0+), minus tick(-), and zero minus tick(0-). Without knowing what this all about everything else is meaningless. I can't go into a discussion about how the specialist book works, because it would be too long-winded.
What I've done is to take the atomic state pair, [(T, P), (dT, dP)] where T is tick, P is price, dT is instantaneous tick change, dP is instantaneous price change, for every trade and then analyze the resulting state in real time by integrating the real time differential equations which characterize the residual flow state. This is a derived state from other state variables. The atomic state pair leads to the stochastic instantaneous elastic states and their components, marginal demand and supply. I set up and solved these equations 20 years ago and I believe they are unique. Nothing can tell you what the future will bring, but my machine tells you how much risk or reward there is, and it is scarry in its accuracy.
However, it is just a machine. That isn't good enough. For example, the current state of the stock market is uniquely risky. I've never measured a worse internal state than now. Today, the machine said the "flow state" was negative. Every day in March it has been negative and is radically diverging from price. It is astounding to see the market advance on negative flows. This is precisely what happened last July. The machine doesn't tell you that this situation won't persist, it only suggests that you would be a fool to buy most stocks. The stock market could persist both in price and time for months with ever growing negative divergence. The machine is saying the exact opposite about golds and oils although the evidence is not very convincing with respect to oils. |
