Unbelievable but true: CFTC declares Technical Analysys as FRAUD :D!!!

Discussion in 'Trading' started by harrytrader, Jun 9, 2003.

  1. http://www.supertraderalmanac.com/censorship/technical_analysis_deemed_fraud_.htm


    "[R]espected scholars are virtually
    unified in their recognition that even the most legitimate technical
    systems (with their hypothetical and retroactive foundations) are
    incapable of providing the trader with any significant market
    advantage." (note 75, p 41)

    "The efficient market capital model emphatically contests the notion
    that financial markets are so inefficient that speculators can exploit
    these markets' inability to adjust to all types of information.
    Although the limits of the efficient capital market model, and its
    implications for regulatory policy, are a dependable source for
    endless debate, few dispute the model's general predictive powers. In
    fact many important regulatory policies are predicated on the model's
    accuracy. See, e.g., Basic, Inc. v. Levinson, 485 U.S. 224 (1988)
    ("fraud on the market" action for a violation of Securities Exchange
    Commission Rule 10b-5); In re LTV Securities Litigation, 88 F.R.D. 134
    (N.D. Texas 1980)." (note 74, p 41)

    "Virtually the entire economic community is in agreement, however,
    that the efficiency of the market is sufficiently strong so that all
    publicly available information is rapidly disseminated and is then
    almost instantaneously reflected in the price for any widely traded
    investment contract. As a consequence, investor analysis of specific
    investment contracts will not lead to superior gains, since it will
    require an analyst to predict value better than the market as a
    whole. Thus, while some traders will profit while others will lose,
    the outcome of speculative investment is unlikely to significantly
    outperform chance. See Dennis, Materiality And The Efficient Capital
    Market Model: A Recipe For The Total Mix, 25 Wm. & Mary L. Rev. 373
    (1984); Posner, Economic Analysis of Law, Ch. 15 (4th ed. 1992);
    Comment, The Efficient Capital Market Hypothesis, Economic Theory and
    the Regulation of the Securities Industry, 29 Stan. L. Rev. 1031

    "Technical analysts . . . first make a deterministic (one might say
    spiritual) leap of faith that non-random price patterns exist. They
    then illogically posit that these patterns, once revealed to the few
    (or indeed -- through marketing -- to the many), may be successfully
    exploited in trading. To accomplish this, of course, the 'pattern'
    must remain undetected by others (otherwise the increased market
    activity defeats the 'pattern' by driving the price to a point where
    speculation is no longer profitable). See Marshall (1989) at
    263-264. Public policy presumes that markets are not so witless.
    'The presumption is [] supported by common sense and probability [as]
    recent empirical studies have tended to confirm Congress' premise that
    the market price of shares traded on well-developed markets reflects
    all publicly available information . . . ' Basic, 485 U.S. at 246."
    (note 75, page 41)"

    <B><FONT COLOR=RED>"[A]ny marketer's claim of increased profitability or reduced risk
    through the use of these systems is likely to be fraudulent". (note
    75, page 41)</FONT></B>
  2. LOL

    TA is the basis for almost all trading in commodities, they better watch what they say.
  3. That's why it is unbelievable : that it comes from CFTC :D. Happily Frank Taucher and other publishers have won their trial but for how long ? CFTC will try again later. What CFTC wants is to defend the monopole of the Big Analysts those who have "honest" opinions :D.

    Not only did CFTC tried to shut up independant analysts but they also wanted to "regulate" trading softwares.

  4. TGregg


    ". . .the entire economic community is in agreement. . ."

    ??? Has anybody ever seen that happen? The only things they are in agreement on is that economists are underpaid and people expect too much from them.
  5. lindq


    What they are missing is the fact that the market is NOT immediately efficient. Traders and investors move stocks based on their OPINION of value. Price moves on this, and not on some mysterious measure of mathematical equilibrium. And because opinions change rapidly - for many reasons - there are invariably trading opportunities. TA helps to identify those opportunities.

    I recently read and reviewed "A Mathematician Plays the Stock Market". His thesis was also that TA was useless, as the market is the efficient sum of all news and opinions at any point in time. He selected crossover MA's as his single example of why TA is useless, and drew the conclusion that because this "indicator" doesn't test well as a crossover, all TA is suspect. What baloney.

    The fact is, the market is a direct reflection of human greed and fear. Prices move because people move prices. In that, there will always be opportunities to profit, and to apply TA as a way to help us determine where inefficiencies might exist.
  6. sabena


    One reason that the efficient market

    hypothesis is not valid, is that

    not all market participants react at

    the same moment.

    The new price after new information

    has reached the market is GRA-

    DUALLY established.

    A person who has a Bloomberg ter-

    minal can react a few seconds after

    the information has been released

    where a good house-father will

    only react when he has read the

    news in the paper the next day.

    I explained this to a professor in

    Economics, he didn't say anything

    anymore. There appeared a little

    smile of understanding on his face...
  7. maxpi


    Academics just produce drivel, usually paid for by the public sector, same as a welfare bum. You can question every last thing in their belief system including the supposed ancient age of the universe and find really good arguments against them from really bright and well educated and experienced people. The thing is that the academics own the venue for debate, the public schools of the world and they do not allow much debate, instead they cover up anything that does not support their belief system. It is a worthwhile thing to do, figure out what all the elements of their belief system are and go find opposing arguments.

  8. whowah


    I am trying to prove that technical analysis works , at least that my system works. If I am right my fund value should outperform the general market.


    is a link to my virtual money mutual fund. In addition to beating the market I must also overcome a 2 percent admin fee and 5 cents a share commission. (Play money of course). So far after about 9 months I appear to be winning.

    note the url is one line only. It may not come out correctly.
  9. Sayeth the Sage of Omaha aka Warren Buffet:

    "I'd be a bum in the street with a tin cup if the markets were efficient."

    As my math teacher used to wirte after making a point:


    Did cftc declare him poor?

  10. The test for market efficiency is based on the joint hypothesis test NOT profit and loss.
    #10     Jun 9, 2003