Acknowledging that the usefulness of technical analysis
is increasingly doubted as market manipulation intensifies, newsletter writer
and technical analyst Tim W. Wood notes today that manipulation is as old as
markets themselves and quotes various authorities to the effect that
manipulation cannot long defeat any market's "primary trend."
But Wood's authorities all precede the seizure of
absolute economic power by the U.S. government, implemented by the Federal
Reserve and Treasury Department and Treasury's Exchange Stabilization Fund --
the power to create infinite amounts of money and to trade secretly in any
market, power that even former central bankers now acknowledge as
"financial repression."
Wood argues that "the very basis of technical analysis is
that everything is discounted into price."
Really? So on April 11, 2013, did technical analysis forecast
the coordinated and overwhelming attack on the gold market by central banks
that would begin on the following day? Does the foresight of technical
analysis today really extend into government chancellories as policies are
decided privately and then implemented by intermediaries through various
instruments and mechanisms, from derivatives to high-frequency trading?
Of course the only entities with such clairvoyance are
governments themselves, and it arises not from any technical analysis but
from electronic surveillance.
"The only variable that I see in technical analysis, like
anything else," Wood writes, "is that one person will see the data
to mean one thing, while another person may see it to mean something
different. We should all be able to relate to that. Therefore, opinions may
vary, but still everything is discounted into price and it all boils down to
the technician, his methods, and the proper interpretation."
Well, of course: Technical analysts will know which of
them got it right -- afterwards.
And exactly what is the "primary trend" of a market
these days? What if, in the era of absolute power in central banking, the
"primary trend" of a market is only manipulation itself? What is
the "primary trend" of the government bond market now that
governments are buying most of the bonds? Is that even a market at all?
And what did technical analysis have to say about the Berlin
stock market in February 1943? According to the official history of the
Berlin Bourse --
http://www.boerse-berlin.com/index.php/Boerse_Berlin/History
-- "on 13 February 1943 exchange trading with continuous
quotation comes to a halt. Shortly afterwards a government act rules that the
Reichswirtschaftsminister will be responsible for fixing the prices for
securities."
At least the Nazis were open about their market rigging. They
didn't bother trading derivatives through intermediaries.
The problem with technical analysis in the current era is that
it presumes the limits of previous eras. When there are no limits anymore,
technical analysis of markets is about as valuable for forecasting as tea
leaves, tarot cards, and chicken entrails, though maybe you can't blame
technical analysts for trying to stay in business. The old days, back when
markets were markets, were better.
Wood's commentary is
headlined "Manipulation and Technical Analysis" and it's posted here.
