Dr. Alexander Elder's books are good arguments that technical analysis works and markets are not random. Let's not confuse the random noise with the market randomness. Comparison with gambling should be limited only. I'm not aware of any technical analysis that works with gambling. On the other hand money management (position sizing) works well both in the markets and in gambling.
KJKent, Yes, it is just a linear correlation function, but the main point was that this function shows that price at t depends on price at t-1. Price t could be the price 5 min ago and t-1 is price 10 min ago. The fact that there is positive autocorrelation by definition shows that the prices are not a stochastic process. I guess i used the wrong terminology - I am not saying you can predict future prices by regression., ie price t+1 by using price t. I am saying that past prices are dependant on each other. The million dollar (maybe billion) question is how to project the price
Call me lazy, i'll call myself too dumb. Would you mind to give the solution to this puzzle you brought up an odd 20 pages back? And the implication of the outcome as well please.
i'm surprised that no random walkers are trying to disprove the lag 1 regression argument or provide other "proof"
There's a difference between "random" and "unpredictable." A truly random event cannot be predicted, even if the observer is able to accurately measure every causal action operating upon the potential future effect. A merely chaotic event is potentially predictable, because it is the product of completely measurable causal factors. At the most fundamental level, uncertaintly in the universe is still an open question. The majority of theoretical physicists subscribe to the "Copenhagen Interpretation" of uncertainty, which holds that it is indeed impossible to simultaneously meausre both the speed and location of an electron, and therefore true randomness exists in the universe. The minority, however, believes that there are other mathematically plausable explanations (e.g., "many-worlds uncertainty interpretation") that would permit simultaneous measurement, and that we simply arent yet able to implement the math with any physical technology. If true, then all things are measurable, and randomness is merely the product of insufficient data. The above represents the "naturalistic" explanations for randomness and uncertainty. There is, of course, the "supernatural" explanation, which would be basically, that God created the universe, and therefore randomness exists or doesn't exist, depending upon God's requirements at any given moment. If you accept this last theory, then you don't need any technical or fundamental tools to make money in the market. You need only prayer.