I'm convinced that there is something to Technical Analysis, and am slowly learning some of the basics. One reason that academic studies may not pick up the traders' ability is that real life traders are keenly following the news along with the Technical information. News is "fundamental" and not objectively quantifiable, so academics are not going to include it.
There's an interesting academic battle going on now between economists and physicists about technical, mathematical analysis of markets. Economists have always been skeptical of technical analysis. Physicists, a number of whom have become Wall Street analysts or "quants," believe they have discovered non-random patterns in markets, some of which correspond to traditional Technical Analysis patterns.
[There are many more physics Ph.Ds produced than there are positions for physicists, leading them to get into all kinds of mischief. J. Doyne Farmer, quoted below, of The Santa Fe Institute built a device to beat roulette, before pursuing the bigger game on Wall Street. [OT - The overproduction of Scientists, Engineers, and Programmers, to keep their wages low, is criminal IMO, and my rant on the exploitation of the "H1-B" program for this purpose can be found at: numbersusa.com ]]
I've included some links regarding the "Science of Stocks," with a couple excerpts.
santafe.edu
swarm.org
santafe.edu
santafe.edu
forexcompass.com
derivativesstrategy.com
moneycentral.msn.com
bearcave.com
bearcave.com
unifr.ch
gs.com
fizzy.murdoch.edu.au
geocities.com
santafe.edu
Why Markets Aren't Rational but Are Efficient
The great paradox of financial markets is this: trade is largely driven by experienced guesswork and simple rules, when not driven by confusion, error, and nonsense, supplemented by (as one financial journalist puts it) "testosterone and cocaine." One could hardly imagine a process less likely to deliver a reasonable evaluation of what something is worth, yet it's exceedingly hard to beat the market over any substantial length of time. How can this be?
This is the puzzle addressed by SFI resident faculty member J. Doyne Farmer in his recent research, summarized in his paper "Market Force, Ecology, and Evolution" <snip>
santafe.edu.
This schism was already evident at a conference held at the Santa Fe Institute in 1988 titled "The Economy as an Evolving Complex System." Roughly half the participants were economists and the other half physicists. Although many of the physicists were largely ignorant of economics, that did not prevent them from openly criticizing the economists. At one point, Nobel laureate Phil Anderson said, "You guys really believe that?" At another point, Larry Summers (now Secretary of the Treasury) accused physicists of having a "Tarzan complex."
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