For example, Long Term Capital Management's market strategy was based on the assumption that historical price relationships between different assets might change but that they will eventually return to normal. Technical analysis is the study of all the factors that influence the price of those pieces of paper, and, in aggregate, the stock market. The media are partly responsible for this misguided attention. So too are the mushrooming day trader types, who embrace classic technical trendlines and oscillators in their frenetic financial adventures because 'normal' investment tools are pretty much useless to them. The growing concentration of assets in one group of stocks will create relative values in other areas of the market that will, at some inevitable point, cause the pendulum to start swinging the other way.
Technicians are in the doghouse.
And yet, they may have their day. Walter Deemer is one of a number of traditional and extremely good market technicians covering equity markets who have been saying for some time that the US market is getting a little 'toppy'. As more and more information becomes available through the internet, the opportunity arises to apply the tools of technical analysis to a huge range of new data. The technical tools available for today's investor are limited only by innovation and historical data. But for the most part, the indicators are not used to forecast stock prices as much as to identify the major market trends and measure risk.