Q: What are the merits of Technical Analysis?

MJ: Technical Analysis studys the dynamics of price action. Since the price action is basically a result of supply and demand, the price movement is subject to certain patterns.

The most common misconception about Technical Analysis is that the charts will predict and forcast the future movement.  Those people fail to recignize that, price dynamics is only one of many forces that move the market.

Technical Analysis  studys only the "natural modes" of price action...meaning that the "system" is balanced. However, in most cases, the "system" is subject to external forces , such as, better than expected earnings report, surprising remarks from the Fed or an outright down grade by Goldman Sachs.

When the market moves with balanced force, either it is up, down, or side ways, the price action will follow the "pattern" very well.   However, it is when the price action does not follow the "pattern" that  a mature and seasoned chart reader could see the most valuable  insightful information about the existence of one or more important external forces.