Today, TA faces something of a crisis of faith. With social media now the medium of choice [and the medium is the message], a change is taking place in how people view technical analysis. Where once it was thought a rational endeavour, with its own sets of rules and conditions, it’s now come to be perceived in quite a different light. Most, it seems, have moved on from that old and quaint idea of objectivity, where one would engage with the phenomena at hand, in a disinterested manner, in order to make some sense out of it. Rather, the increasingly dominant paradigm is that of marketing. Instead of the chart being an end in itself, to be contemplated objectively, it has come to be considered as a means to an end, with that end being the marketing or pushing of an agenda or bias, whether bull or bear. It is considered almost inconceivable, by those subscribing to the new paradigm, that a chartist could ever be unbiased. They might argue that bias drives everything, and all language is power, and various incommensurate narratives struggle for dominance in a Darwinian world etc. And then charting degenerates into memes, where subscribers to those memes become not only ignorant of TA, but positively hostile to it, for the meme is all about mass belief and force of numbers. It’s hardly surprising that in this environment voices become increasingly shrill. The aim of this article will be to sketch out a conceptual landscape within which the idea of what I term disinterested or objective TA can take place. This should be of interest to anyone interested in TA for its own sake. In doing so, I’ll look to take the best of both worlds, the old and the new [which is reactionary], and offer something of a synthesis of the two, for most progress in the field of ideas usually results from a dialogue leading to a middle way - a practical way of proceeding, to counter-balance an overly theoretical one.

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People tend to ask of TA too much on the one hand, or too little of it on the other. They may imagine that the chartist has a crystal ball to call price correctly, or failing that, must be irremediably a slave to his bias and prejudice. The truth of the matter is however that these two views are the two opposite ends of a spectrum, and all chartists could be arranged along the length of this spectrum at some point or another. The rational practitioner of TA would be somewhere in the middle of this spectrum, neither providing a certainty, nor capitulating and pandering to what he and others want from the chart. For the chart, if anything, serves as a reality principle against which his wishful thinking is corrected. First and foremost, the rational chartist recognizes the uncertainty principle. This is the base from which the superstructure of his speculations rises. Being uncertain, he’ll also hedge. Unsurprisingly, these are characteristics shared with investors, as investors too are in the business of finding trends, as they develop over time, and as recorded on the chart. Seasoned investors have learnt to take the FA with a grain of salt, they’ve heard it all before. What they want to see is a real time appreciation, an existing trend that they can reasonably think continuous, something that any rational agent could appreciate, and not something dependent on a person’s passions, which are all too often driven by politico-philosophical persuasions and worldviews. They want to see something sober and sensible, something like a science of sorts. But, the consumer of memes will interject - there is no objectivity, and all are biased!

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It’s an obvious truth that a person brings a lot to the chart, and then proceeds to interpret that chart a particular way. Yet though this may put pay to the myth of pure objectivity, it need not do away with the notion of objectivity altogether. If the process of interpretation is central to charting, then an understanding of that process will be crucial. As anyone a familiar with Thomas Kuhn realizes, all observations are indeed theory laden - we bring as much to the observation as that which is observed brings to us [the dialectic] as the old ‘is it a duck or rabbit’ picture encapsulates:

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Figure 1. Is it a duck or rabbit?

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Of course Kuhn, a historian of science, says this theory-laden observation is absolutely central to the progress of science. The objectivity, the check on the theory, which would otherwise degenerate into a pseudo-science, is the testing of that theory against real world conditions. What would otherwise be a ‘bias’ [always with a negative connotation, and there is bias for you] is translated into a more rational theory, hypothesis, or even a model. The rationality consists in its capacity to be tested by external conditions, with that test usually involving a prediction of some sort. If it meets the test, it is further validated, in the sense that it has value as opposed to being true in an ultimate sense. My point here is that just as empirical science brings to bear some idea or theory on all the various phenomena before it, so too does rational TA. We can say that TA is a rational discipline, insofar as it follows a method and a process, just as various sciences do. This is neither to ask too much from it [absolute truth] or to ask too little from it [mere marketing/ propaganda].

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But the reader may be left wondering how drawing a few lines on a chart could equate to an empirical science. To which I’d reply that the crucial factor here is time. If time were to be placed on a spectrum, with the shortest of periods at one end and the longest of periods at the other, randomness and possibility would belong to the shortest periods, while pattern and probability would belong to the longest periods. There would be varying degrees of probability/ randomness depending on what point of the spectrum you were dealing with - at the one end, minutes would be near completely random, at the other end, years would have a much higher degree of probability. Just as with any science, where momentary observations only start to make sense when accumulated into a mass over a longer period of time, so too with TA. It applies most effectively to longer time frames, where lines might be drawn, and trends discerned. To ask whether the trend actually ‘exists’, or is ‘a sure thing’ is to ask the wrong question. Empirical sciences do not do certainty. The language used in TA [as with all models] is just a manner of speech, short hand for it’s as if price were observing this trend [or phenomena this law] etc. To repeat this hypothetical language would get tiresome indeed, and yet perhaps it’s required as people tend to be losing this sense of the hypothetical… and the specific kind of rationality that is involved with that language. Notice, there is a distancing involved from literal language here, and a distancing of theory itself from that which it refers to. One could consider it, in a sense, a language game, though one not totally arbitrary and with some normative constraints [once again the dialectical method].

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If one lacked this kind of rationality, and in all seriousness and literalism simply wrote TA off, then they would appear to a TA practitioner as something of a ‘flat-earther’. As opposed to seeing the earth flat, the flat-earther here is one who sees thought [and language along with it] as flat. It is an antithetical/ right and wrong/ polarized/ black and white view of the world that operates only within a flat two dimensional frame of mind. It is marked by simplicity. It does not negotiate with complexity, or distinctions between possibility and probability, or the nature of the hypothetical whatsoever. Rather, its character is heavily reductionist, and can also be overly analytical in contrast to the imaginative synthesis required for modeling hypotheticals. For the flat-earther, the various modalities of thought are reduced to a ‘mind-set’, where the mind, or rather cogitation, quite literally becomes set, to ossify more often than not into some doctrinal formula. And it’s these doctrinal formulae that all too often provide a so-called certainty, that very idea that inoculates the mind against uncertainty, on which all empirical [and fallible] sciences are built. For the ‘flat-earther’, the only question making sense within their paradigm is whether the theory on the chart is true of not. From the TA perspective this is a ‘category error’ - you may as well ask if the theoretical constructs of quantum physics actually exist or not. The theory is not ‘true’, but is valid if it works. And in the field of TA, this test for validity requires the passage of time - actual price development.

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Which brings us back to the idea of objectivity. Yes, there is no knowable object behind the theory otherwise known as representation [what a shame they ever thought there was], but that doesn’t rule out objectivity altogether. TA is objective, and not just the pandering to a subjective bias, insofar as the trends it postulates and extrapolates are subject to testing in the real world. But more than objective, as in contrast to the myth of pure objectivity, TA is dialectical. It consists of a dialectic or interplay between the TA practitioner and the seeming chaotic price phenomena of a volatile chart. TA is most fruitful and relevant when predicting price development in the not too distant future so as to be testable. The corollary to this is that TA also relates to predicting price in the not too near future, where immediate short term volatility is more random and unpredictable. TA works best in that middle ground, in that goldilocks zone, which is also the ground best suited to investors, for they themselves are interested in realizing some gain by investing the present in the not too distant future. If TA can not provide certainty to investors [whoever thought it could], it can certainly provide some confidence while both their positions and opinions remain hedged.

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