Pressure Waves in Price Action — A Study in Post-Impulse Response
Introduction: Seeing Markets as Dynamic Systems
Price movement is often described as randomness or reaction, but it’s more accurate to view it as energy transfer through a medium — a system of liquidity, expectations, and reflexivity.
Each sharp leg down or up is a pressure wave:
- Impulses release stored volatility energy.
- Responses are the system’s elastic recoil — a recovery proportional to how much energy was displaced.
The question isn’t merely where support lies, but how quickly the system recovers from displacement.
“Instead of asking where is support, we can ask how strong is the restoring force.”
Dataset: SOL-PERP 30-Minute Chart
The example below comes from a 30-minute SOL-PERP chart in early November.
Each yellow line represents a post-impulse response — the recovery leg that begins once 80–90 % of the preceding decline has completed and selling acceleration decays.
Figure 1 — Yellow segments mark recovery impulses following each sell-off. The downward trend continues, but the response legs reveal strengthening elasticity.
Identifying Post-Impulse Responses
We treat each sell-off as an impulse leg and the subsequent recovery as a response leg once downward momentum decelerates.
Steps
- Impulse leg: sustained red candles, volume spike, and expanding Bollinger Bands.
- Decay completion: slope magnitude and momentum indicators (e.g., MACD histogram) flatten.
- Response leg: price begins advancing until slope crosses zero again or reaches a local high.
Metrics
Optional normalization:
This provides an apples-to-apples measure of how effectively buyers reclaim ground after each liquidation wave.
Findings: Reinforcing Elasticity
Across successive impulses, several patterns emerge:
| Wave | ΔP (USDT) | ΔT (bars) | Pace (ΔP / ΔT) | Observation |
|---|---|---|---|---|
| 1 | … | … | … | Weak retrace — sellers dominant |
| 2 | … | … | … | Stronger recovery, higher pace |
| 3 | … | … | … | Two-step rebound, symmetry forming |
Key takeaways:
- The vertical distance reclaimed after each drop grows.
- The time needed to achieve that distance stays roughly constant.
- Therefore, pace = ΔP / ΔT increases — buyers regain ground faster.
That acceleration signals rising elasticity: the market’s “restoring force” strengthens even within a broader downtrend.
Diminishing Volatility Contractions
After each sell-off, Bollinger Bands contract before the next move.
The purple boxes below highlight those volatility contractions.
Figure 2 — Each purple box marks a volatility squeeze following a sell-off. Notice that each subsequent contraction is shallower.
Observations:
- The first contraction is deep — bands pinch dramatically as volatility resets.
- The second contracts less; the system has partially stabilized.
- The third barely tightens — energy dissipates more smoothly.
If we track Bollinger Band Width:
we see a staircase pattern of higher lows in volatility compression — evidence of damping.
The system’s oscillations release less energy with each cycle; the market’s “viscosity” increases.
Interpretation: The Market as a Damped Oscillator
Each impulse behaves like a spring being compressed — a sudden displacement of equilibrium.
The rebound’s amplitude and speed describe how much potential energy remains and how efficiently the market absorbs shocks.
Early waves show under-damped behavior: wide swings, deep contractions, over-correction.
Later waves transition toward critical damping: moderate rebounds, smoother oscillations.
“The final yellow leg isn’t just a bounce — it’s the system ringing at a higher frequency, signaling that selling energy has been spent.”
Quantitative Extensions
- Band-Width Series: Plot normalized Bollinger Band Width to visualize volatility damping.
- Elasticity Curve: Plot ΔP / ΔT across waves to track recovery acceleration.
- Algorithmic Base Detection:
grad = price.diff().abs()
decay_done = grad < grad.rolling(n).max() * 0.1