And Market Symmetry by William T. Erman
Many traders see only simple symmetry such as a 20-week
bottom-to-bottom move followed by another. Unfortunately,
if indeed there is another 20-week cycle, it could very well
turn out to be 18 weeks or 22 weeks instead of the anticipated
20. Ermanometry, which was introduced to STOCKS & COM-MODITIES
readers in February 1999, considers a 20-day
window, the four-week spread, to be of little help in today’s
complex markets. Compound pivots are measured in days
instead of weeks and take into account that markets are both
very precise and spherical in character. They can be used to
reveal market symmetry in increments of days and to illustrate
the fact that successive identical moves in three-dimensional
space may appear noncontiguous on the plane. Here,
compound pivots and balance points, both tools used for
decoding the hidden symmetry of the markets according to
Ermanometry, are explained.
Intermarket analysis and neural
networks have popularized the
advantages of applying analytical
output from several markets
to the analysis of just one.
Ermanometry’s compound pivots
concept is another method
of combining markets to generate
more accurate projections
when used for timing analysis.
For example, there is a definite
symbiotic relationship between the critical paths of the Dow
Jones Industrial Average (DJIA) and Standard & Poor’s 500.
A similar relationship exists between old-crop and new-crop
agriculturals, different maturities in the financials, and in
most other market categories. We’ll use the DJIA and S&P to
first look at the definition of compound pivots, and then we’ll
study some examples. Finally, we’ll see how compound
pivots can be effective in projecting future pivots.