[na85]

>For technical analysis to be anything other than an abstract form of gambling, the efficient market hypothesis has to be flat out false.

Technical analysis is predicated upon the assumption that the efficient market hypothesis is true, and that all investor sentiment and other relevant information is all already priced in.

Whether TA is actually valid or if it's just drawing random foofy lines on a chart remains up for debate.

[bsamuels]

No, for technical analysis to work, EMH needs to be false.

If EMH is strongly true, then the price of a security will always be priced to the intrinsic value of the underlying. For TA to work, the price needs to be divorced from the intrinsic value because the change in intrinsic value of an asset doesn't follow any pattern.

If EMH is strongly true, even fundamental analysis should yield no alpha since all public information would be integrated into the price. That's why there's a distinction between strong and weak EMH.

https://www.investopedia.com/ask/answers/032615/what-are-dif...

[quantgenius]

Ever wonder why decades after the EMH was postulated it's still a Hypothesis? and not considered a Theory or something stronger? There are far too many people with far too good and consistent a trading record, who's style of trading uses only or primarily price and time data for any reasonable claim that technical analysis doesn't work. This doesn't mean that a typical investor can access investment pools run by these traders, just like the typical investor cannot access the best VC funds or the hottest startups. They typically have tightly binding capacity limits and once the track record is clear, they can pick and choose who to let in.

People pushing technical analysis do believe that it's pointless to look at fundamentals because all (or most) fundamental information is already in the price and hence it's pointless to look at fundamental data. In my opinion this discussion is about as pointless as a religious war.

In the real world specifics and details matter. In general, the weak form of the EMH does hold, as in if you think something is worth twice what the market says it is and you don't have a really good reason why the market doesn't realize this, you are almost certainly wrong. This of course makes a weak form of the claim that all fundamental information is in the price also true.

[na85]

>No, for technical analysis to work, EMH needs to be false.

The way it was explained to me is that if the EMH is true, then looking at fundamentals is pointless because all the fundamentals are already priced-in, which leaves nothing but price and volume data left to analyze.

How could EMH be anything other than true in that case?

I'll note that investopedia is often not a good source. Here's an investopedia article that explicitly supports my position, for example: https://www.investopedia.com/terms/t/technicalanalysis.asp

[apetresc]

> The way it was explained to me is that if the EMH is true, then looking at fundamentals is pointless because all the fundamentals are already priced-in, which leaves nothing but price and volume data left to analyze.

So, TA proponents believe that market forces, economics, political and social trends, etc, are all instantaneously absorbed by the market - but "double tops"[1] and "hanging mans"[2] and "three black crows"[3] are all low-hanging fruit that the elite can take advantage of?

I'm usually pretty open-minded, but I can't make myself see anyone believing this non-ironically.

[1]: https://www.investopedia.com/terms/d/double-top-and-bottom.a... [2]: https://www.investopedia.com/articles/active-trading/040914/... [3]: https://www.investopedia.com/terms/t/three_black_crows.asp

[na85]

I dunno. I think fundamentals move markets and TA is mostly bs so I'm not here to litigate the validity of TA with anyone.

[bsamuels]

The same claims about TA/EMH are made as part of the CFA study materials that are made in the investopedia I linked.

I'm afraid I don't know what else to tell you, there's no public links to CFA Institute study materials and they're a pretty definitive certification authority in finance.