Positive technical signals tend to precede good financial reports from a company. That is, the technical patterns precede and anticipate the fundamental reports. Stock price patterns reflect the buying and selling of all the people who have intimate knowledge about the company. The rest of the investment world creates the noise in stock behavior that accompanies the pattern created by those with knowledge. That is why sell strategies based on fundamentals are too slow in a volatile market.

Before the crash in 2000, many investment managers had relied on "fundamentals" to tell them when to sell. However, as the market crash approached it was often the case that by the time the company announced that earnings were going to be "soft," the stock had already declined. Sell strategies based on fundamentals (earnings, cash flow, order backlog, etc.) turned out to be much too "sluggish" in relation to market action and in comparison with sell signals based on technical analysis (volume & price patterns of the stock). The problem was compounded by the fact that analysts were often far from accurate in their forecasts regarding the financial prospects of companies. Some of the shortcomings of fundamental analysis are addressed by technical analysis.

Technical analysis offers its proponents the opportunity of responding in "real-time" to a stock's behavior. Technicians do not have to wait for the next quarterly report from the company. In other words, technicians can quickly respond to what is (current stock behavior) rather than wait to see if what ought to be (projections by fundamental analysts) actually happens (if the company actually generates the earnings expected by analysts). Each company has links with suppliers, competitors, officers, and employees. These in turn have families and friends. Many of these people are investors. There are also outside investors, thinkers, reporters, and others who are watchers of these people and their companies. The total knowledge of all these people is reflected in stock behavior. The cumulative effect of all the buying and selling activity of these people, and of those who watch these people, defines the regions of supply and demand (resistance and support) evident in the market activity of the stock and consequently in the patterns evident in the stock's behavior.

That is why stock behavior often precedes a company's announcement about earnings performance over the last quarter. The suppliers of a company know if that company has been increasing or decreasing orders for the supplies, equipment, or support needed to produce products or deliver services (people associated with these suppliers and their friends buy and sell stock). The competitors of a company know who is exerting the strongest pull on customers (people associated with these competitors and their friends buy and sell stock). Family members of employees and all their friends also have a general "feel" for how well a company is doing even without the use of "insider information" (these people and their friends also buy and sell stock). The sum total of all this "knowledge" is reflected in stock behavior much faster than analysts can get their next quarterly report written and published. Statistically, their combined actions reduce "noise" ("noise" is created by the actions of the uninformed) and increase order or "pattern" in stock behavior.

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