technical analysis and charting, page-41

woddonnee: Eugene Fama is indeed a very strong, reputable, well-known, nobel prize winning academic. He was also a varsity football player and someone who understands how the real world works. He was studying Frech History of some crap at uni when he realised there was a lot more money in Finance. He developed his revolutionary theories that are a major part of all Australian finance degrees today and are followed by many successful finance companies. Many finance theories such as the CAPM are theorietically brilliant and award winning, but no-one argues that they work in practice. However, Fama puts his money where his mouth is by putting his theories into practice. He is on the board of very successful investment companies.
I am surprised that you are investing your money without having come accross this theory - arguably the most predominant investment theory of our time.

Nikk0 - You are taking a behaviouralist approach. I agree with you. The EMH doesnt say that people dont overreact, but it says that this overreaction is unpredictable and one cannot, over the long term, systematically produce alpha through these 'mispricings'.

However, to counter my own argument. Technical analysis has become somewhat of a self-fulfulling prophecy in that:
People believe share prices move according to technical indicators. A lot of people believe this. As such, if one of these indicators appears - obviously a lot of people will react to it, and many in the same way... e.g. a 'typical sell signal' will mean that these technical traders all sell the stock - consequently pushing its price down. They think that by their charting brilliance they have got out just in time. But in reality, it wasnt the charting indicators that meant the price was going down... it was that fact that so many people falsely believe that this type of trading is legitimately able to make money, that they react to it accordingly and the price reacts. It is a behavioural phenomenon that will most probably vanish over the next few decades.

In the meantime there may be opportunities for the quick ones to make some money... but not much... and not for the reasons they think.