Can you expand on that last bit? If I am understanding correctly you are saying popular chartists can influence the market?
While I can extend my thinking to accept this as a possibility, I'd suggest their influence is not absolute. Other factors like market sentiment, economic indicators, company news, institutional investors, and algorithmic trading programs can also impact stock prices. Further more the degree of reach one would need to posses in order to influence a stock with a MC in the hundreds of millions +, with an annotated chart and a limited retail audience (on a small forum), would be impressive to say the least.
It's my understanding that institutional level money move stocks. There are self-fulling prophecy elements at play I agree, and it's my belief that those tend to be at the more obvious end of the spectrum where low alpha is on offer. Selling and buying around obvious RSI or Bollinger Band deviations for example. A quick back-test tends to expose these strategies as being quite poor, if not loss making. As something I've paraphrased in the past - if it's obvious and available in the many thousands of books available then it will be exploited. The 10% of winners need their 90% of small fish to profit from.
This topic kind of reminds me something else I've been reading about, which is Soros and his concept of reflexivity.
(this is taken from a chatGPT conversation):
Soros' concept of reflexivity is a theory that suggests that market prices do not reflect objective reality, but rather are influenced by the subjective perceptions of market participants. In other words, market prices are not determined solely by the underlying fundamentals of an asset, but are also shaped by the way in which people think about and react to those fundamentals.
According to Soros, the relationship between market prices and underlying fundamentals is not a one-way street, but rather a feedback loop. The market prices can influence the fundamentals, just as the fundamentals can influence the market prices. This feedback loop creates a self-reinforcing cycle of expectations, which can drive prices away from their true underlying values.
Soros argues that this feedback loop can lead to market bubbles and crashes, as market participants become overly optimistic or pessimistic about the prospects of certain assets or markets. He suggests that successful investors must be aware of the influence of reflexivity and the role of subjective perceptions in shaping market prices. They should aim to anticipate and understand the biases and expectations of other market participants, and be willing to adjust their strategies in response to changing market conditions.
In summary, Soros' concept of reflexivity suggests that market prices are not solely determined by objective fundamentals, but are also shaped by the subjective perceptions of market participants. This creates a feedback loop that can drive prices away from their true values, and can lead to market bubbles and crashes. To be successful, investors must be aware of the influence of reflexivity and be willing to adjust their strategies in response to changing market conditions.
On how market prices can influence company fundamentals:
Market prices have a significant influence on the underlying fundamentals of an economy. This is primarily due to the wealth effect, which leads to increased spending and investment as asset prices rise. This increased demand can then drive up economic growth, corporate earnings, and other fundamental indicators, creating a self-reinforcing cycle.
Another way in which market prices can impact fundamentals is through the financing and investment decisions of corporations. As stock prices rise, companies may become more willing to issue new shares or borrow money to fund new projects, driving up economic growth and supporting higher asset prices. However, it is important to note that market prices can also become disconnected from economic fundamentals, leading to bubbles and other market distortions that can ultimately lead to a correction or crash. It is crucial to monitor the relationship between market prices and economic fundamentals to avoid unsustainable market distortions.
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