Very interesting - I suppose the question to ask, as you mention at the end, is are investors inadvertently "creating" patterns by attempting to search for them? For instance, certain strategies in technical analysis don't actually have much meaning intuitively - but if a significant number of investors are using them, their actions almost certainly affect the market and "create" some sort of a pattern.

Reading the paper now - I agree, very interesting so far

Thanks, that's very interesting. I've actually been on the look-out for something like this for quite a while. One thing that continues to amaze me is humans' ability to see patterns where there are none (e.g. superstitions). What is indeed interesting is that superstitions often lead to self-fulfilling prophecies (e.g. I did not walk under this ladder and nothing bad happened -> success and reinforcement of superstition).

It is probably fair to say that this also applies to the stock market -- as the paper suggests. If enough people believe (and apply) a dual-moving-average cross-over this is exactly the pattern that we will observe. However, it seems critical that this would lead to arbitrage in the market as those are perturbations induced by superstitions. Thus one strategy might be to run the most commonly used algorithms (might be very hard to assess which those are) but always bet in the opposite direction.

Folks might be interested in http://www.aheadofthecurve-thebook.com/. I read it awhile back and the author keeps the charts updated on his website. My take-away was that when consumers have money in their pockets, they spend it (perhaps "irrationally"), and companies profit, driving stock prices higher. No money, no spending, no profits...stock prices go lower.