Examples - Preface

Examples of our discoveries presented on this site will provide you with information about our methodologies. We believe that the examples illustrate the total originality and great benefits of our work.

Contents of this section:

Introduction
On Price, Time, and Volume
On Time
Proportions: As Simple as A is to B as B is to C
Rationale for why the following examples have been chosen
Notice:  TRADING DAY COUNT - PROTECTED INTELLECTUAL PROPERTY
Ermanometry Examples - Index of Charts
Understanding the Properties of EZones
Understanding the Properties of Invisible EZones

Introduction

The charts and explanatory text in this section provide definitive, irrefutable evidence that market timing is often perfect to the day for periods covering many decades! This statement is equally correct when market time is measured in increments of one hour or as small as 15 minutes, and timing is accurate to a single hour or 15 minute period. These are very strong assertions, or to put it in the vernacular, this is pretty "scary stuff", but also very exciting! Nevertheless, as will be demonstrated, the math, the facts, cannot be ignored!

The big "WHY?" do markets conform to such orderly progression can be answered from a philosophical perspective. If you have read the article on Log Spirals, on this site or in the February issue of Stocks & Commodities, you are already aware of Ermanometry's concept that the markets belong to the natural realm and therefore order is "natural" for them. However, markets are created by humankind, and there is no evidence of any conscious plot by market movers and shakers to create perfect markets. Perhaps the urge to create order is subconscious. 

Consider the spider spinning the geometrically perfect web. As far as we know, the spider has no conscious knowledge of the wondrous feat he performs. The eminent psychiatrist Carl Jung postulated that a mass collective unconscious unites all human beings. Perhaps humankind, like the spider, is unknowingly creating geometrically perfect markets. There is a wonderful poem by Theodore Melnechuk that sets forth the idea of humankind being manipulated by forces totally foreign to its collective conscious mind. The poem is about puppets speaking to their puppet masters and the audience, telling them that although they might consider themselves far superior to mere puppets, "transcendental gods", they too are puppets and manipulated by "some higher god's inserted arm".

Could natural law, and humankind's collective unconscious be the "last ventriloquists" upon whose laps the markets sit?  Think about it.

Price, Time, and Volume are the three market characteristics most often quantified, massaged, tortured with sharp indicators, and poked with red hot formulas, until these demonic instruments inflict enough pain to make the data confess. Obtained under duress, these confessions are fraudulent. The data will confess to whatever the analyst is looking for. If the analyst is a random walk adherent, the data will confess that its market parents are guilty of a disorderly life style. During periods of extreme volatility the data will accuse the market not only of being disorderly, but drunk and disorderly. Proponents of order will squeeze the data until it confesses that crimes of passion occasionally occur when two androgynous cycles of equal length are found lying next to each other, albeit toe to head. Prolonged prodding may elicit a confession that the market is the consummate efficiency expert, able to ingest and interpret billions of bytes of information and instantaneously display its prowess in the valuation department. Too many types of data mixed together, too many indicators, and too many analysts with preconceived agendas, will produce too many conflicting conclusions. It doesn't have to be this way. It doesn't have to be this hard! 

Time is the single most important market characteristic. Markets "exist" without price or volume during trading halts, limit days, lack of interested buyers and sellers, etc., but markets cannot exist in a vacuum. Time is always present; the one "constant". You might think think that this is such an obvious fact that it need not be stated here. Everybody knows that time is a universal constant. That is precisely the reason that time is more relevant to the markets than price and volume. Time affects all humanity, and it is humankind that makes the markets. Price and volume do not affect anybody, except for the temporary emotional swings of a large profit or loss, due to price movement.

Seminal, traumatic events in a persons life, have a profound effect on their future life. These events are often referred to as milestones. Milestone is more appropriate than "yearstone". In fact, yearstone isn't a word; it doesn't exist. Why not? There is no need for such a word as long as we think of life as a journey, implying distance or travel. We use "milestone" to describe important turning points in the history of not just individuals, but for nations, or "happenings" such as wars, etc. A milestone is a tangible, palpable, and usually extremely dense and heavy object, but here it is used to denote location in intangible time. Perhaps we are unconsciously acknowledging the possibility that time may exhibit qualities normally thought of as the province of substantive items, and time may be more "tangible" and reverberatory than our conscious minds are willing to consider.

An historical market chart is a canvas upon which the moving finger of the market hath writ. The market has traveled this terrain and recorded its milestones, turning points. The topology of this terrain is three dimensional and the milestones occur at mountaintops and valleys; traumatic, seminal events. These milestones will affect the future paths of the market.

"Location, location, and location" is the mantra of real estate professionals when describing the three most important elements of a property's worth. Proportion, proportion, and proportion are the three most important elements for decoding market movements. Time, the duration of the markets movements, and price, the measurable portion of perceived market value, always bear a definitive proportional relationship to previous market movements. 

As simple as A is to B as B is to C  is just another way of saying "as simple as a three term continuous proportion.," but we didn't want to intimidate anyone by using a "mathematical" expression. But, it is very simple:

"Three" refers to the quantity of terms/elements/items in the expression: A, B & C. If a 4^th term is added, the expression would be "A is to B as B is to C as C is to D. Now the expression would be described as a four term continuous proportion.
Let's replace the letters A, B & C with numbers; 20 is to 10 as 10 is to 5. There are 3 terms, 20, 10 & 5

The important point to remember about the term ratio is that it is always used to compare quantities by division.

The words "ratio" and "proportion" have become almost interchangeable in everyday, conversational English, and nobody has a problem understanding what is meant when they are used. However, in mathematical terminology, these two words have precise definitions, and they are different.

Proportion refers to an equality of ratios. "An equality of ratios" is a fancy way of saying that the same ratio is generated in more than one place by different sets of numbers.  Thus, in the previous example, since the ratio of 20 divided by 10 is equal to the ratio of 10 divided by 5, the three terms, 20, 10, 5, constitute a 3 TERM CONTINUOUS PROPORTION. "Continuous" refers to the fact that any pair of the 3 quantities, in ascending or descending order, generates two equal ratios. 

A DISCONTINUOUS PROPORTION refers to a sequence of quantities that produce equal ratios, but the sequence is not "continuous". For example:

20 divided by 10 equals 2, and 8 divided by 4 equals 2. In descending order, 20-10-8-4 does not generate a "continuous" proportion because 10 divided by 8 is 1.25, not 2.

Therefore, the sequence would be described as a DISCONTINUOUS 4 TERM PROPORTION.

We apologize for this little exercise on definitions. You probably learned about ratio and proportion in grammar school. If you haven't thought about it lately, you probably forgot it. Our excuse for this simplistic lesson is that the words and phrases just defined will be used in the explanatory text for the examples that follow.

Ermanometry Research uses many disparate sets of historical data as tools for decoding past market activity and forecasting the future critical path of markets: nominal price data refers to data recorded as the actual price, or value, of the market under study. For example, the DJIA intraday high of 01/08/99 would be recorded as 9647.7

"Constant dollar" data refers to data that has been adjusted inflation/deflation. This type of data is sometimes referred to as "inflation adjusted" data. A benchmark time period, such as the average for a month or year, or even a specific day, is chosen, and all prior and subsequent nominal prices are adjusted to the benchmark. The consumer price index is calculated in this manner. It is relatively unimportant what benchmark is chosen, because it is the relationships between the data entries that are of value. These relationships, relative positions on a chart etc., will be constant, regardless of the benchmark chosen.

Nominal and constant dollar data are the only two types of historical data that will be used for the examples that follow. However, there are other valuation variations that are used when doing intensive research on a specific market. The indices, whether constant dollar, or nominal price, are derived from stock prices denominated in US dollars. A chart of the DJIA denominated in Swiss Francs, the British Pound, or the new Euro will show a different picture than one denominated in US dollars, due to currency fluctuations.

If our market was flat, in US dollars, and the Brazilian currency was being devalued, it would take more Brazilian currency to "buy" the DJIA, and thus a chart denominated in Brazilian currency would show the DJIA moving up. This type of cross market valuation is particularly valuable when researching commodities such as crude oil, and metals, and very important for debt instruments. If the viewer is interested in this type of somewhat esoteric analysis the Topline Encyclopedia of Historical Charts is literally a gold mine of fascinating information: Topline Investment Graphics