that he would deny any allegiance to it. Instead of being a chartist, Charles Dow as a financial reporter advocated to invest on sound fundamental economic variables, that is buying stocks when their prices are well below their fundamental values. His main purpose in developing the averages was to measure market cycles, rather than to use them to generate trading signals.
After the work of Hamilton and Rhea the technical analysis literature was expanded and refined by early pioneers such as Richard Schabacker, Robert Edwards, John Magee and later Welles Wilder and John Murphy. Technical analysis developed into a standard tool used by many financial practitioners to forecast the future price path of all kinds of financial assets such as stocks, bonds, futures and options. Nowadays a lot of technical analysis software packages are sold on the market. Technical analysis newsletters and journals flourish. Bookstores have shelves full of technical analysis literature. Every bank employs several chartists who write technical reports spreading around forecasts with all kinds of fancy techniques. Classes are organized to introduce the home investor to the topic. Technical analysis has become an industry on its own. Taylor and Allen (1992) conducted a questionnaire survey in 1988 on behalf of the Bank of England among chief foreign exchange dealers based in London. It is revealed that at least 90 percent of the respondents place some weight on technical analysis when forming views over some time horizons. There is also a skew towards reliance on technical, as opposed to fundamental, analysis at shorter horizons, which becomes steadily reversed as the length of the time horizon is increased. A high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self-fulfilling. There is a feeling among market participants that it is important to have a notion of chartism, because many traders use it, and may therefore influence market prices. It is said that chartism can be used to exploit market movements generated by less sophisticated, `noise traders'. Menkhoff (1998) holds a questionnaire survey among foreign exchange professionals from banks and from fund management companies trading in Germany in August 1992. He concludes that many market participants use non-fundamental trading techniques. Cheung and Chinn (1999) conduct a mail survey among US foreign exchange traders between October 1996 and November 1997. The results indicate that in that time period technical trading best characterizes 30% of traders against 25% for fundamental analysis. All these studies show that technical analysis is broadly used in practice.
The general consensus among technical analysts is that there is no need to look at the fundamentals, because everything that is happening in the world can be seen in the price charts. A popular saying among chartists is that ``a picture is worth a ten thousand words.''