Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.
> Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis
I'll let you in on a little secret. Technical analysis is a lot of smoke and mirrors. I was in this industry.
You can draw all the head and shoulder patterns you want, if Elon posts a Tweet about price targets of 420.69, Apple doesn't sell enough iPhones, the company you are charting causes a major oil spill, or the weather gets warmer, those patterns vanish in an instant.
Millions of global traders do not obey lines drawn on charts. The market is too complex for that.
It's not smoke and mirrors because enough people follow it. Then it becomes self fulfilling. Yes, conceptually, in a vacuum it's BS. But you have enough demand and belief in it, it validates itself. This is how the market works...
> not smoke and mirrors because enough people follow it
There is a lot of empirical evidence around it not working. Flow of funds analysis has merit, but that largely occurs by trading against people looking for constellations in candlestick charts.
You can't prove a negative like that. It'd be like academics looking for monetizable edge in the orderbook after properly simulating latency. They wouldn't be able to do it due to a lack of domain knowledge but they didn't prove a negative through their failure.
As for the effectiveness of TA, there's a tonne of dogma on both sides with extremely certain people saying it does or does not work.
If we take a broad definition of TA (which is edge existing in operations on a time series of prices), I have conclusive evidence that it does work. I have seen a strategy print money almost daily using only that data as an input.
If we take a narrow definition of TA, defined as lines on a chart, well I'm a believer of that too, although the evidence is not as strong. I just suspect that it works due to my observation of how things react in the market according to those levels and lines. Here's one you can look out for yourself. Observe what happens when the price moves through yesterday's close price. You will notice that volatility becomes significantly elevated. That's edge, and it's TA edge.
I don't believe it works merely due to the self fulfilling prophecy aspect. It works because other market participants put stop orders, resting limit orders, or algo trading rules (in banks' liquidation or acquisition algos) tied to those levels.
Professionals by and large do not use traditional/manual TA. If you find some features/indicators that work, you include them in your algorithmic trading system.
There's absolutely zero legitimate reason for a human to look at charts and use TA.
Market timing has always been a thing. Whether it's a bottom or a top or a head and shoulders pattern. This is the whole point of technical analysis and there's enough people out there to care about every single thing the market does at any stage in it's cycle.