) in a certain
stock or in 'the averages' and then deducing from that pictured history
the probable future trend."
Fundamental analysis is about the study of key statistics from the
financial statements of firms as well as background information about
the company's products, business plan, management, industry, the
economy, and the marketplace.
Economists, since the 1960's, sought to rebuff technical analysis.
Markets, they say, are efficient and "walk" randomly. Prices reflect
all the information known to market players - including all the
information pertaining to the future. Technical analysis has often been
compared to voodoo, alchemy, and astrology - for instance by Burton
Malkiel in his seminal work, "A Random Walk Down Wall Street."
The paradox is that technicians are more orthodox than the most devout
academic. They adhere to the strong version of market efficiency. The
market is so efficient, they say, that nothing can be gleaned from
fundamental analysis. All fundamental insights, information, and
analyses are already reflected in the price. This is why one can deduce
future prices from past and present ones.
Jack Schwager, sums it up in his book "Schwager on Futures: Technical
Analysis", quoted by Stockcharts.
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