Technical Analysis is Hogwash in the Long Term

• Posted by Greg Harmon
• on April 23rd, 2015

Being a technical trader means being able to let different views wash over your back, like water flowing by. Many do not believe Technical Analysis (TA) can work at all. “It is a self fulfilling prophesy” “shapes and patterns determining prices – baloney, horse feathers, hogwash” or “how can a line on a page stop the price?” They do not understand the concepts, and by the way, a line cannot stop price.

But even those that embrace TA in their short run trading decisions tend to toss it out the window when it comes to long run implications. Why? Do the behavioral aspects of supply and demand not hold in the long run? Are there magic powers that exist on a smaller timescale, like the subatomic forces at work in the universe that do not impact the larger day to day world? Those that embrace technical analysis for the long run are a much smaller bunch.

Despite that bias, there continue to be long term charts of price action that defy that logic. The 20 year chart of the Nasdaq 100 above is one of them. On a long term basis it seems perfectly happy to let TA terms describe it. The bearish Bat harmonic has been playing out and may be completing. The Elliott Wave pattern fitting in as well with a Wave IV due, and expected to be a more flat corrective wave, before another push higher. But I guess there is nothing to see here.

Yes, those that embrace technical analysis for the long run are a much smaller bunch. I am proud to be one of them.

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