PREFACE echnical analysis is one of the oldest market disciplines, yet the majority of the investment and academic communities consid- er it, at best, a minor supplement to their own work. At worst, it is disparaged as tea-leaf reading or simply a self-fulfilling prophecy. Look at these two phrases. They suggest that the technical analyst divines the market from some mystical process. This could not be fur- ther from the truth. T Consider the fundamental analyst. This person relies on company reports, conversations with company insiders, and macro-economic research in relevant business sectors. All this is indispensable when determining if a company is viable and predicting how its business will fare in the future. Now consider the source of all the raw data. Much of it is projection and conjecture. How can you rely solely on such raw data when earn- ings reports and other industrywide data will be subject to revisions? Technical analysis looks at actual trades in which bulls and bears have put their money where their collective mouths are. There is no revision of data. There is no ambiguity. There is no mystical divining of the future. All market and stock selection is based on current, not past, price performance, the predictable behavior of market participants, and the dynamics between markets over time. Trends exist. Information is slowly disseminated to the public in an imperfect manner, and as the public acts on the information, the mar- kets move. They continue to move until either the last group has acted or an outside influence, such as news, ends the trend. Sounds a lot like physics, does it not? A body in motion tends to remain in motion. Look at another aspect of the analysis. Behavior is a key component of the analysis. When similar market conditions occur, market partici- pants react in similar ways. This is how the patterns and measurements within technical analysis are created. xxi