Question - if you are charting from 30 years ago, shouldn't he trend line be exponential rather than linear? And what does that do for support levels?"
Freewill, I've been out of the market since June 2010 (but bought a small parcel of CCC at 5.7 cents a few months back - ouch) and am not a heavy user of charts. But you referred to the trendline needing to be exponential which, I'm pretty sure, is only used for moving averages, not trendlines? Someone correct me here.
Fundamentals should always hold over technical annalysis, as companies with great fundamentals have bounced back nicely since the GFC - albeit maybe not as high for some. However, I like to look at charting purely as a tool to take a step back and observe patterns as a representation of crowd behaviour. I look at it like this - if charting did not ever exist, then the market will not know whether it's above or below a trend line. It won't know if it's above or below a moving average as well. Therefore, if the market ever fell below the non existent long-term trendline, then not one single person out there would react as a result.
But the market does have a memory and that memory is price action which I believe holds true over everything else. Patterns that comprise of price action behaviour are your double tops, double bottoms, all time highs, all time lows and 'head and shoulders'. All these patterns will effect the market behaviour - with or without the existence of charts. The head and shoulders pattern occurs during volatile activity, sending emotions sky high. It pretty much mimmicks a violent roller coaster ride where pretty much all participants take notice; by the time the price starts falling off the last shoulder you can literally hear the market say "Oh no, not again" where it finally falls off a cliff when breaching the neckline. But like fundamentals, there's no guarantee that the market will react as predicted.
But charts do exist, and that long term trendline will be monitored by a certain demographic of traders and investors, some being big-time fund managers. It will be irresponsible for professionals to not react on the breach of such a long term trendline - imagine having to explain to management why you didn't take action on such a powerful signal if the market violently collapsed from there. Therefore, you can literally guarantee that some money will be taken off the table the day the ASX falls below the trendline. Others won't do so immediately, but will remain on stand-by to reduce holdings if need be - the more that go on stand-by, the more likely you will get an avalanche of selling activity for no reason other than the existence of 'that trendline'.
Charting can never be 100% dismissed simply because there's a percentage of traders and investors who act on powerful signals - when they act together the market can often be overcome by the their actions.
