> > Burton Malkiel exposed some technicians to
>> some charts he'd randomly generated, and they found their usual
>> pennants, double bottoms, and rising wedges anyway.
>
>Why is that surprising? Technical analysis basically says that you can
>spend your time trying to figure out what's going on, or you can get an
>aggergate of that information as expressed by all participants in the
>market itself by simply looking at the price action. Pattern People
>have just formulatized that into the following: "If a certain sequence
>of events occurs, a particular group of market participants are likely
>to have the following reaction to it, and if you're watching for it
>like I am, you might be able to take advantage of that edge in beating
>those who are about to repeat history" ... hardly Science, but also
>not Quackery.
>
>In a sense, real charts are "randomly generated" in that you couldn't
>predict what the chart would look like before the data gets filled in
>over time; so what is Burton doing here that the market doesn't already
>do?
People who practice tech analysis say chart patterns reflect psychological dynamics or supply/demand dynamics - which implies some nonrandom structure. E.g. "resistance" or "support" represent price points where people have sold or bought in the past. If technicians can't tell a random chart from a real one, then one suspects the charts are just inkblots they're projecting their own fantasies onto.
Doug