"Naturally, you are correct - the usefulness of the technical analysis in manipulated markets is smaller than if these markets were totally free. However, I don't think that it makes it totally useless nor that it prevents one from profiting by using it. It's just that the more manipulated a particular market is, the less useful the technical analysis gets. USD, gold and even the silver market are not that 'manipulated' as the short-term interest rates are. This implies that these are at least somewhat free markets, and that the technical analysis has at least some use. Of course there is not such thing as a "somewhat free market", I'm just using this artificial phrase to make a point. Even the price patterns that materialize before brutal sell-offs are somewhat similar to each other and can therefore be detected by means of technical analysis.
The technical analysis has its flaws, but so does any other type of analysis, and I assume that the best way to deal with this is to combine many of them."
I have great respect for GATA and for their actions, but please note that even the gold market, which is often called manipulated, is mostly controlled by free market mechanisms. By that I mean that it is only a smaller part of the gold reserves that are controlled by central banks. Quoting from Wikipedia: 'At the end of 2004, central banks and official organizations held 19% of all above-ground gold as a reserve asset'. As of 2001 the all of gold ever mined totalled 145,000 tonnes. As of September 2008 29,783.9 tonnes of gold were held as forex reserves - source: World Gold Council. This is about 20.5% of total gold ever mined, so this percentage did not change much in 4 years. Therefore still 4/5 of all gold is NOT being controlled by central banks.
Even if we take into account that governments act on cold logic and are error-free (still, Bank of England managed to sell half of their holdings at the exact low, please search for "the Brown bottom" for more information), we still get the vast majority (80% or so) of gold holdings that are controlled by normal, psychological mechanisms. The technical analysis is based on the fact that psychological mechanisms repeat throughout history and can therefore be predicted with a considerable probability of being correct. Therefore applying this analysis to the gold market makes sense most of the time.
Please take a look at this Market Alert - that's an example of the technical analysis working in practice on USD and the gold stock markets.
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