statisical voodoo in technical analysis

I was earlier surprised at the disdain in academia of technical analysis. apriori, it seems like a very natural thing to do, when the phenomenon we are trying to learn, when aggregated, has no other way of aproaching it except historical data. Today i got the answer.

Technical analysis is primarily associated to "voodoo". Charters see certain patterns like cup and handle or head and shoulders and predict certain patterns int he price. Why would there be any reason for prce to behave as predicted in these patters! They do not give credibility to that question. they simply assume the existence of it.

First argument in favour of it. these patterns have something to do with investor psychoogy.

Defense: Earlier when investors acted on intuition tis was probably true. But now most investors act of econometric signals. So this psycology cannot be assumed. Remember in the first place we said tha investor psychlogy might vindicate these.

Argument against it: Simple arbitrage arguments should tell us that the number of believers in them are more than the probability of finding the. hence in aggregation they should now reverse the trend. This lends some explanation of why Andrew Lo couldnot catch the flaw in them. he tried to compare the distribution of returns after such a patters with ormal return distribution of the secuirty and found a difference in the behaviour. he did not cancel out the positive bias earlier with a negative bias later in the range of values he tested the hypotheses on.