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Andy--You've got a great memory! The article was in the January, 1996
issue, page 32. It summarized an Aug/95 Federal Reserve Bank of New York
report titled "Head & Shoulders: Not Just a Flaky Pattern".
In the report the authors (Osler, a senior economist in the research
dept of the NY Fed and Chang, assoc professor of finance at NYU Stern
School of Business) analyzed the predictive power of the
head-and-shoulders pattern in the currency exchange market.
In their words, "The head-and-shoulders trading rule appears to have
some predictive power for the German mark and yen but not for the
Canadian dollar, Swiss franc, French franc or pound. Nothetheless, if
one had speculated in all six currencies simultaneously, profits would
have been both statisically and economically significant...These results
are inconsistent with virtually all standard exchange rate models and
could indicate the presence of market inefficiencies."
If you want a copy of the article (3 pages) email me your fax number.
Andy wrote--
Wasn't there an article in Futures Magazine in either 1996 or 1997 that
stated that 2 economists from either the Fedreal Reserve or the Treasury
Dept. found that there was some validity to the "Head and Shoulders"
pattern's preditive powers about 60% of the time? If is so, that
technical
analysis works. Logically, then that the efficient market THEORY (sorry
for
the big caps but I want to state that it is just a theory, not a rule or
a
law) and the random walk theory has been debunked?
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