Technical analysis

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Today's xkcd:

Mouseover title: "I [suspect] that we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity. I suspect that the immense power of the computer is being harnessed to this 'paper economy', not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges." –James Tobin, July 1984

There are two linguistic hooks:

Just right of the center, a paired fall and rise are labelled "declination" and "uptalk", which are two terms used to describe aspects of intonational patterns.

And "Technical analysis" is a good example of a semantically non-compositional phrase. As Wikipedia explains,

In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.

Compositionally, the phrase "technical analysis" should mean something like (combining dictionary glosses)

"A detailed examination or study of something so as to determine its nature, structure, or essential features, requiring advanced methods for successful completion."

Instead, it ends up meaning something like "A body of pseudoscientific beliefs and practices based on the notion that complex properties of stock-price time functions can be used to predict their future trajectory". Some examples from a friendlier point of view can be found here, including (among dozens of others) these:

 



31 Comments

  1. Peter Grubtal said,

    January 23, 2019 @ 7:57 am

    Having done some mountain walks with guides, I've noticed that when our guide says "there's a technical section coming", it's a euphemism for "you might just break your neck up ahead if you don't keep a jolly good look out.

    "Technical" has acquired a lot baggage over the years.

    On the markets again, there's also a technical rally.

  2. ~flow said,

    January 23, 2019 @ 8:38 am

    There seems to be a surprising link between the annotated interpretation of the charts (I've heard the word 'charting' for the technique and set of beliefs pictured here) and, brace yourselves, the absence of (warm and cold) fronts on weather services like https://www.windy.com. They do have pressure lines (isobars), but they do not show the fronts that printed weather maps used to have.

    This is one argument for not having them: "windy visualizes weather models (automaticaly). Weather fronts are drawn by hand by experienced meteorologists. It is a subjective procedure and windy has no meteorologists to do that. Even big weather companies or National Meteorological Services
    may draw fronts in different locations or shapes for the same weather situation." (https://community.windy.com/topic/5558/%D0%BB%D0%B8%D0%BD%D1%8F-%D1%84%D1%80%D0%BE%D0%BD%D1%82%D0%B0/2)

    Another answer to this question—why not have fronts on the map—claimed that they are essentially arbitrary elements that have to be more or less guessed from the pressure (and temperature?) data.

    Also somewhat related: trying to visually identify segments from speech spectrograms.

  3. Kyle MacDonald said,

    January 23, 2019 @ 9:28 am

    Mathematicians will also often use the word "technical" in sentences like, "Before the proof of the main theorem, we need the following technical lemma," which generally means not quite that the lemma is difficult or requires advanced techniques, but rather that it is thin on conceptually important ideas, and that one could conceivably imagine bypassing it with a more insightful proof strategy, but at present it's needed for the theorem to go through.

  4. Dan S said,

    January 23, 2019 @ 9:33 am

    I thought "technical climbing" meant "climbing that requires interesting equipment (technology)," such as protection, ice axe, or crampons. No?

    If so, then perhaps "technical", as used by your guide, isn't bring used in a technically-correct sense. It's instead a generalized and vague word, to mean "difficult".

  5. Eric said,

    January 23, 2019 @ 10:04 am

    And "technical fabrics" are those where the garments constructed thereof are so far superior to anything you own now, that you must purchase them immediately regardless of cost.

  6. Rose Eneri said,

    January 23, 2019 @ 10:46 am

    How do we describe people who base investment decisions on technical analysis?

    Bankrupt!

  7. Yuval said,

    January 23, 2019 @ 10:55 am

    "Declination" is also followed by "Inflection", which I believe to be a mediocre pun on "Declension".

  8. BillR said,

    January 23, 2019 @ 11:13 am

    This stuff (as in pretty much all economics/market analysis and forecasting) reminds me of all the pseudo-scientific hoax articles submitted, peer-reviewed, and published over the years in various humanities journals. Also pretty much all new-agey claptrap, especially anything with the word, quantum, in it.

    Once again, XKCD reprises the emperor's new clothes, meme.

    I wonder if it's possible, with some sort of statistical testing perhaps, to come up with a bullshit rating on these things? And then I wonder where on the scale anything to do with, say, theoretical physics would fall?

  9. Trogluddite said,

    January 23, 2019 @ 11:43 am

    The use of "to balloon" in the last line of the mouse-over quote isn't idiomatic in my idiolect (though the meaning was clear enough.) For some reason I expect it to be reflexive; the number of financial transactions might "balloon", but an agent would cause this to happen by "inflating" their number.

    @Dan S, Eric
    Besides implying "difficult", maybe also a hint of marketing psychology; "in succeeding at this, you are demonstrating your skilfulness at something considered challenging by experts." Likewise, "technical fabrics" appears to have a similar connotation of "look what a clever and discerning monkey you are". Back in my caving (spelunking) days, the word "sporting" was similarly euphemistic; essentially meaning "very tough on one's body and probably very cold and wet, but completely lacking any 'pretty bits' as a reward for one's efforts".

    The word "professional" is another victim of the same kind of bleaching as "technical". It is a running joke amongst many engineers and craftspeople that any tool with the word "professional" in its brand name is far less likely to meet their requirements than one which does not. My impression is that marketing idioms such as "professional quality" are even more ubiquitous than the misuses of "technical".

  10. Daniel Barkalow said,

    January 23, 2019 @ 12:41 pm

    I thought "technical analysis" was, compositionally, "a detailed examination of the elements or structure of something, (but only) according to a strict interpretation of the definition". It does, after all, involve examining elements and structure in detail, and the definition of "analysis" doesn't technically require that these elements be meaningful and the examination be useful and lead to accurate conclusions.

  11. Jonathan Smith said,

    January 23, 2019 @ 1:11 pm

    "technical elements" in figure skating lingo? this must go back a bit

  12. Rube said,

    January 23, 2019 @ 1:25 pm

    @Trogluddite: "Back in my caving (spelunking) days, the word "sporting" was similarly euphemistic; essentially meaning "very tough on one's body and probably very cold and wet, but completely lacking any 'pretty bits' as a reward for one's efforts"."

    This seems similar to what I've noticed among the crab fisherman on "Deadliest Catch": If the weather is getting dangerous even by Bering Sea standards, they are likely to say "It's getting nautical out there".

  13. JKreuscher said,

    January 23, 2019 @ 2:16 pm

    In "Roughing It" Mark Twain describes an unlucky prospecting trip with an old sourdough who used the word "technical" with no apparent meaning other than that the thing characterized by it does not suit him. About coffee made with alkaline Humboldt Sink water, Twain wrote:
    Mr. Ballou, being the architect and builder of the beverage felt constrained to endorse and uphold it, and so drank half a cup, by little sips, making shift to praise it faintly the while, but finally threw out the remainder, and said frankly it was "too technical for him."

  14. DWalker07 said,

    January 23, 2019 @ 3:17 pm

    Some of the stock market "charting" sites use some of the weirdest lingo — much of it sounds like post-hoc justification or pattern-seeking. I don't know how many of them, if any, are getting rich by talking about "head and shoulders", "resistance levels", "support levels", etc.

  15. Mary Kuhner said,

    January 23, 2019 @ 5:23 pm

    In chess, a "technical win" is one that may require significant time and effort from the player, but is supposed to be feasible without any flights of brilliance, just knowledge of appropriate techniques. These generally arise in endgames with only a few pieces remaining, where one might plausibly forsee the whole remaining course of the game. Of course, many times when the commentators say that something is a technical win, the player in question will fail to win it….

    The current World Champion holds that title in fairly large part because he wins not only the majority of his endgames that are considered technical wins, but quite a few that are considered technical draws: he is inhumanly accurate in the endgame and will torture his opponent until they crack. I recently got to hear a grandmaster who had managed to beat him speak about the game: he said roughly, "I was down a pawn, and in the technical endgame I would probably lose. Or I could play for the attack, and probably lose. So I thought…why not?" He won a very fine attacking game.

    [(myl) An interesting difference between this use of "technical" and the market-charting use is that "technical" tactics in chess actually work, if correctly implemented, whereas "technical analysis" as an investing technique seems to provide reliable returns only for the people who write books about it.]

  16. chris said,

    January 23, 2019 @ 8:19 pm

    "I thought "technical climbing" meant "climbing that requires interesting equipment (technology)," such as protection, ice axe, or crampons. No?"

    I had a similar interpretation, except that the requirement is for advanced technique, rather than advanced technology.

  17. J.W. Brewer said,

    January 23, 2019 @ 9:20 pm

    It may be useful in some of these contexts to try to understand what "technical X" is for a given X by trying to identify what kind of X it's not. An apophatic approach, to use a high-falutin' word. In the stock-market context "technical analysis" is conventionally contrasted with "fundamental analysis," but I suspect that "technical" v. "fundamental" is probably not a standard or even common pair of antonyms across multiple domains. I don't know the jargon of a lot of the other fields alluded to in this thread to even know how to fill in all the blanks. What sort of chess win contrasts with a technical one? What sort of climbing contrasts with the technical kind? Etc.

  18. Anthony said,

    January 23, 2019 @ 10:01 pm

    Technical analysis uses price or price-plus-volume to predict price. It can also "predict" fundamentals: during the Iran-Iraq War we would see crude oil prices spike and from that infer (predict, or more accurately, retrodict) that a tanker had been hit.

  19. Jerry Friedman said,

    January 23, 2019 @ 10:54 pm

    Mary Kuhner: The current World Champion holds that title in fairly large part because he wins not only the majority of his endgames that are considered technical wins, but quite a few that are considered technical draws: he is inhumanly accurate in the endgame and will torture his opponent until they crack.

    Couldn't resist mentioning this game from today. Not that I understand what they're doing, but apparently it was a draw till move 74.

    J. W. Brewer: I don't know an antonym for "technical win" or "at this point the win is a matter of technique" in chess. You could say that one player does something brilliant, original, imaginative. Maybe one player has a won position but the winning move is hard to find.

  20. BZ said,

    January 24, 2019 @ 9:50 am

    @~flow,
    Wow, seriously? Weather fronts? In most cases it's quite easy to tell where a front is. The difference of temperature and wind direction (and secondarily lower pressure) for a long enough distance across a narrow enough boundary. Cold vs warm vs stationary fronts can be detected by movement (or lack thereof) of this feature over time. Sure, an occluded front requires more analysis of temperatures and winds at different elevations, but even that data is all readily available. There are of course edge cases, but it's hard for me to believe that you need a human to draw reasonably accurate weather fronts most of the time.

  21. Philip Taylor said,

    January 24, 2019 @ 11:48 am

    JWB ("What sort of climbing contrasts with the technical kind?") — I am not a climber, but it seems to me that a technical climb requires considerable skill while a non-technical climb requires "only" stamina, guts, strength and endurance.

  22. Stephen said,

    January 24, 2019 @ 12:20 pm

    I play d a game of monopoly in which I was told I "technically" won; I don't know what that means. I don't remember anything else about the game Was it like a Pyrrhic victory?

  23. Rube said,

    January 24, 2019 @ 2:53 pm

    @Stephen: somehow I'm reminded of the line from Futurama: "Bureaucrat Conrad, you are technically correct — the best kind of correct."

  24. Jerry Friedman said,

    January 25, 2019 @ 12:04 am

    Philip Taylor: JWB ("What sort of climbing contrasts with the technical kind?") — I am not a climber, but it seems to me that a technical climb requires considerable skill while a non-technical climb requires "only" stamina, guts, strength and endurance.

    Around here (that may mean the whole U.S.), a mountain that doesn't require any skilled technique is called a walk-up.

  25. Philip Taylor said,

    January 25, 2019 @ 5:20 am

    Jerry ("a walk-up") — I like it ! But I was, to be fair, assuming that all mountain climbing requires some skill, but that technical sections require skills considerably beyond those needed for the average ascent …

  26. KeithB said,

    January 25, 2019 @ 10:04 am

    I would think that a technical win in Monopoly would go like this:
    Player A has most of the money and property, but Player B has less money and Boardwalk and Park Place maxed out with hotels.

    Player A has the bad luck to land on Boardwalk several times, bankrupting him.

    So even though Player A was in the much better position, a few bad rolls made them lose the game.

  27. Jerry Friedman said,

    January 25, 2019 @ 10:38 am

    Philip Taylor: Jerry ("a walk-up") — I like it ! But I was, to be fair, assuming that all mountain climbing requires some skill, but that technical sections require skills considerably beyond those needed for the average ascent …

    Well, I've gotten to the summit of some mountains here in New Mexico and I have no skill beyond walking uphill. This might depend on your definition of "climbing" (and "mountain").

  28. bianca steele said,

    January 26, 2019 @ 12:14 pm

    I've had a yoga teacher who mentioned that her approach was more "technical" than another teacher at the studio, by which she seemed to mean less "difficult" (it was a beginning class so I couldn't judge that) or even "focused on telling you where to put your feet" than that she talked about things like breath and attention more than spirit and so on.

    I feel the cartoon in the OP is almost certainly self-referential, or should be.

  29. Lars Ingebrigtsen said,

    January 26, 2019 @ 1:01 pm

    On a British talk show last night, a boxer was interviewed about winning the fourh "world championship" or something, and I tried transcribing what he said:

    "Was it as easy a fight as I predicted?"

    "Yeah, it was. It was a technical fight. It wasn't like a slug fest like blood and knock downs it was more of a technical boxing match, secure the belt and I can get on and secure the fifth one."

    So I guess "technical" is used many circumstances to mean something like "not difficult, but just something you have to get through"…

  30. Philip Taylor said,

    January 27, 2019 @ 8:01 am

    Lars ('I guess "technical" is used many circumstances to mean something like "not difficult, but just something you have to get through"…'). I am not convinced. If the boxer who won had less well developed technique(s) than his opponent, then he would (probably) have lost. As it was, he was grateful that he was not involved a slug-fest, but was able to both defend himself and to defeat his opponent using skill and technique rather than brute strength and stamina. This is (not suprprisingly) similar to my earlier analysis of the term "technical" when used in the mountain-climbing sense.

  31. DWalker07 said,

    January 30, 2019 @ 5:24 pm

    @Jerry Friedman: You mean how A-Mountain is not really a mountain? I used to walk up A-Mountain in about 20- minutes or so.

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