“Markets can remain irrational longer than you can remain solvent.

” ― by John Maynard Keynes

☛ Markets aren't efficient and that they are subject to herd behavior.

☛ If you're smart and rational you'll see the irrationality long before the market does.

☛ That is, even if you are right that the market should go up (or down), the weight of opinion can
keep that from happening for an unpredictable length of time. And during that time the market may
go opposite to the 'right' direction.

☛ “Markets can remain irrational” - this implies contrary to old school economics that markets are
sometimes irrational. Old school economics asserts that markets are always rational because they
are stable and self correcting due to the fact the participants are rational. Unfortunately with
masses of people there are manias of optimistic greed and pessimistic fear. This is because people
observe their peers, both optimists and fear are contagious. Often times this contagion becomes
universal. Old school ECONOMICS or even algo based systems FAILS to account for this HUMAN
REALITY. Though there are Artificial Intelligence systems that collectively read news and
sentiments via rss feeds, tweets, headlines, API services, etc... that may sum up as some type of
human behavior.

☛ “longer than you can remain solvent” - old school economics assumes that an economic collapse
cannot exist when supply and demand relentlessly spiral downwards to zero. That is because when
everyone cuts back on consumption in response to uncertainty the paradox of thrift begins. Demand
falls which induces further cuts in consumption. This was most recently evidenced in the
depression of the 30's and for brief period in late 2008 / early 2009. The modern policy response is
to stimulate demand by government stimulus. What is logical for a single person, a cutback in
consumption is fatal when implemented by all people. The key factor here is confidence. The
economy cannot survive without the rational assurance of confidence which has to be guaranteed
by the government as a last resort if the market fails to create it.
 ...........with some extra sauce of wisdom from David (Hanover), starting from below image.........

☛ "The technical analyst sees only a small part of the total picture. Price charts show HOW price
behaves (the EFFECT -- above the water in the image), while the underlying drivers combine in tug-
of-war fashion to determine WHY (the CAUSE -- beneath the water in the image). Because the cause
always precedes the effect, TA/PA is lagging.

☛ All Technical Analysis (TA) / Price Action (PA) is derived from price data that has already
occurred. Some folk believe that PA is leading. But (for example) by the time a pin-bar on a 1 hour
chart has formed/closed, its extreme price has been left behind -- and even an indicator-based
crossover (on a shorter TF) might have given an earlier signal. Perhaps the best chart-based tool
you'll found is S&R (or S&D zones, if you prefer). Now, the reason: it is caused by institutional order
flow, that seeks to exploit vagaries in liquidity.

☛ Is it possible to profit from TA alone? Absolutely YES.

☛ Most money manager uses TA... But TA practitioners are nonetheless at a disadvantage, in that
TA/PA lags price, and price itself lags its drivers, in an industry where speed of access to quality info
can provide a competitive advantage. Some of the tools used by institutions are available to retail
traders. For example, charts like Order Flow Analytics (OFA), footprint and bookmap it can gets the
trader one step nearer the action, by providing a liquidity map.

☛ A lot of algo-based trading is based around liquidity imbalances, for the obvious reason that
heavyweights seek best-price fills with the least slippage. And if many large institutions trade
according to same principles, then their actions will likely have a cumulative effect, creating
repetitive and potentially exploitable patterns." — by Hanover —

...other explanations below :

☛ “Technicals move only with fundamentals behind it. And at times... Technicals move ahead of
Fundamentals. Market buys (or sells) on anticipation of profit. Always, it is an intuition for profit.
And whatever fears there are — political, social or economic — are calculated risks in business.” —
by Harry G. Liu

☛ Why Technicals move ahead of Fundamentals? “Sometimes, too much speculation drives the
price and added with some greed, the technical will lead too much ahead of its fundamentals that
will cause the price to correct, consolidate...then either it breaks out to start, resume or end a trend.”

☛ It affects the price as an example... The price movement in terms of correlation, wherein positive
& negative between pairs or crosses exist. This can turn to “normal” at any time, making though a
pair to fall and the other to fall slower or to go sideways. There is also the possibility for a pair to
rally in order to “reach” the other pair in terms of their prevalent correlation (positive or negative).

☛ Then on charts, you'll notice a price divergence and/or convergence and other times a price
consolidation occurs before a break-out or respect to certain price inflection points (S&D or S&R or
Pivot levels, Fibs... etc.).