Understanding The Properties Of Invisible Ezones

Invisible Ezone is the term applied to a day which had been previously projected to be an Ezone, and on which day the market does make new extreme intraday ticks, BUT THERE IS NO REVERSAL. In the days immediately following, the market trend accelerates. This day is termed "invisible" because:

SUBSEQUENT CHARTS COVERING THE SUBJECT TIME PERIOD WILL NEVER SHOW THE DAY AS A TURNING POINT. THEREFORE IT IS "INVISIBLE".

Ermanometry will use the "invisible" day for future projections.

Case History - Trading Strategy

January 21, 1985, is an excellent example of an Invisible Ezone. This particular day provides an illustration of how beforehand knowledge of a projected Ezone can be extremely valuable in formulating trading strategy:

Knowing the location of a projected Ezone is more important than trying to anticipate whether or not the trend will break through the Ezone.

As noted in the newspaper article in this section, January 21, 1985 was identified as an important Ezone as early as May, 1984. There were a considerable number of other target days projected between May, 1984 and the January 21, 1985 date. An important bottom occurred on October 10, 1984. This date had also been projected in advance and is noted in the same article. For the S&P, Oct. 10 was the final low prior to January 21, 1985.

The DJIA made a slightly lower low in early December, 1984, creating a Compound Pivot and Balance Point. This divergence, due to the S&P failing to make a new low, was a good early indication that the market would move up.

Therefore, with the knowledge that the next important Ezone was not until January 21, 1985, one would have instituted, or maintained, long positions, based on the knowledge that the uptrend would continue at least until the January Ezone, provided that the October and December lows held. As always, other technical indicators would have been used throughout.

The trend literally exploded through the Ezone on January 21, 1985. The next important Ezone was not expected until July. If one were trading solely on Ermanometry, long positions would have been maintained at least until July. However, as is repeated over and over, and over in this book, Ermanometry is an invaluable trading tool, but it is not a complete trading system. Therefore, it would be imprudent to make trading decisions based solely on Ermanometry. Other technical tools must be used with it.

Newspaper Article, Atlanta Constitution, October 30, 1984

Ermanometry shall be forever grateful to Nick Poulos, the Business Editor of The Atlanta Constitution in 1984. Mr. Poulos provided some of the earliest public exposure for Ermanometry. A copy of his column for October 30, 1984 is included in this section. As you will see, publicity is a two-edged sword.

Mr. Poulos was kind enough to detail the many precise projections Ermanometry had made during 1984, including that for October 10. The interview took place in the later part of October. If the reader has absorbed the previous parts of this book, it should be apparent that Ermanometry rarely projects exactly what the market will do when it reaches an ErmanZone. Mr. Poulos was a very intelligent man, and a brilliant journalist, but he made no claims about understanding the intricacies of market projections. In addition, his readership did not want a short course in, "if this happens, then that will follow, but if possibility B. happens, then the outcome will be C." etc. They wanted to know what the market was going to do, and when it would turn, short and sweet.

Mr. Poulos was aware that Ermanometry’s next Ezone was January 21, 1985. He wanted to know what was expected to happen at that time. He was told that since the market appeared to be strong, and as long as the 10/10/84 low held for the S&P 500, the market should be making new highs in January. As for when the market would turn down, he was told that the next "possible" time, the next "opportunity", would be the January date. All of the other possibilities were outlined. Mr. Poulos said he would have to go with one single statement and not detail all the possibilities.

Therefore, the subheading in the article says "Peak on January 21"... this is the two edged sword. Without an understanding of Ermanometry, almost every projection can be misconstrued.

The good news is that he said Ermanometry had been consistently correct.

Quotes from Wall Street Journal

On January 22, 1985, Beatrice E. Garcia, a staff reporter for the Wall St. Journal quoted Martin Zweig, a very prominent Wall St. figure, as follows:

"It was difficult to explain what prompted the market to take off PRECISELY YESTERDAY. This could have happened Thursday or Friday for all I know, " Mr. Zweig said, noting the ABSENCE OF ANY SIGNIFICANT ECONOMIC NEWS TO MOVE THE MARKET. *

In the Abreast of the Market column, Ms. Garcia wrote:

"Bullish investors had tried in vain several times since last August to push the DJIA above the 1240 level. Every time the industrial index neared that point, sellers stepped into the market. BUT YESTERDAY THE INDEX ROARED THROUGH THAT LEVEL WITHOUT HESITATION..."

How Advance Knowledge Of An Ezone Enhances Trading Profitability

Prior January 21, 1985, the knowledge would have been an important factor in maintaining long positions.

If the market made new extreme highs on January 21st, and did not appear to be making new highs on January 22nd, the trader would reverse, exiting longs and entering short positions. This reversal of positions on January 22nd is based solely on Ermanometry timing work. However, Ermanometry should never be used without additional technical tools. In real time trading, waiting until the next day, January 22nd, might result in reversing positions much too far from the high. Thus, the trader may have exited longs at a predetermined price objective on January 21st, and waited for a sell signal from other indicators before entering a short position. Knowledge of the Ezone would enable the trader to reverse once again, cover shorts and enter longs, if the high price of January 21st were exceeded on later days.

Upon reaching the Ezone, if the market broke through, which is what did occur, the trader would add to long positions, knowing that an extended upmove was anticipated. This is contrary to three market adages that may have dissuaded the trader who was not aware that an Ezone had just been broken:

1. Don’t Buy Breakouts

2. Don’t "buy high"

3. Negative Divergence: The S&P made new all time highs, while the DJIA did not.

Validation Of The Ezone

The Rules state that if the trend does not reverse during the time period of the Ezone, an acceleration of the trend will follow. This did occur. Therefore, the projections had been correct, and the January 21st date could be used for further projections. Although the July Ezone had already been targeted, the fact that January 21st was precisely in between the July 25, 1984 low, and the July 17, 1985 projection, was additional confirmation for the July date:

July 25, 1984 - 124 Days - January 21, 1985 - 123 Days - July 17, 1985.


The following four charts graphically illustrate The Invisible Ezone Principle:

IE (Invisible Ezone) Chart 1: This chart illustrates the S&P making a slight penetration of the uptrending channel, XWAY, at Y, but failing to close above it, 3 days prior to the 01/21 Ezone. This was an early indication that the Ezone might not be an important turning point, but would be an acceleration point. Channel ABCD was also penetrated.

PRINCIPLES:

A. Other indicators must be used in conjunction with Ermanometry.

B. If an important chart point is violated during an Ezone, an acceleration of the move will follow, in the direction of the violation.

IE CHART 2: This illustrates the DJIA reaching the top of the downtrending Channel, XAMB, at Pt. Y. Remember, the the S&P was forming an uptrending channel during this same time period. The DJIA had already broken through the downtrending channel MNOP. The market was turned back by the top channel line at Pt. Y. However, although the DJIA failed to penetrate at this time, the S&P did break through the next day (refer to IE Chart 1).

PRINCIPLES:

A. The DJIA and the S&P must be analyzed in concert.

B. If an important chart point is violated during an Ezone, an acceleration of the move will follow, in the direction of the violation

C. In early December, 1984, the DJIA exceeded the low of 10/10/84, but reversed on and closed up on the day. The S&P could not penetrate the 10/10/84 low, creating positive divergence, and a Compound Pivot.

IE CHART 3: This chart illustrates that the Ezone was equidistant between the major Low of July 25, 1984, and and the major high of 07/17/85.

PRINCIPLE:

Ermanometry uses important Ezones for projections, even though they do not appear on any chart as turning points or pivots. That is one reason knowledge of the existence and location of Ezones is critical. And, to repeat, Invisible Ezones are "invisible" because they are not visible a bar chart.

IE CHART 4: This chart illustrates the tremendous significance of the Invisible Ezone relative to being either the beginning or end point of market moves of equal time distance, or symmetrical, within 1 day.

A: 1742 days between the major high (constant dollar peak for DJIA) of 02/09/66 and 01/11/73 (nominal price peak for DJIA & S&P). 1743 days between 03/01/78 and 01/21/85, the Invisible Ezone. (these moves are marked with an A on the chart)

B: 1384 days between the nominal price low for the S&P on 10/04/74, and "Black Monday", 03/27/80, the day the Hunt’s and Bache had the shootout over the silver market. 1385 days between the Invisible Ezone and the 07/16/90 peak, prior to the Gulf War. (these moves are marked with a B on the chart)

C: 694 days from the 03/01/78 low to the 11/24/80 peak. 694 days from the Invisible Ezone to the intraday low of the big crash, 10/20/87. (these moves are marked with a C on the chart)

D: Please refer back to IE Chart 3, for the additional symmetry of the Invisible Ezone located equidistant from the 07/25/84 low and the 07/17/85 peak.

PRINCIPLES:

A. Ermanometry considers the parameters of market time to be spherical and multidimensional.

B. Perfectly symmetrical moves in 3 dimensions may appear noncontiguous on the plane.

C. The Invisible Ezone of 01/21/85 is of sufficient importance to be used in future Ermanometry projections.