Final answer:
The Efficient Market Hypothesis (EMH) suggests that a technical analyst cannot consistently outperform the stock market using technical analysis. This is because stock prices already reflect all relevant information about the future.
Step-by-step explanation:
The Efficient Market Hypothesis (EMH) proposes that the stock market is efficient and reflects all available information. According to EMH, stock prices already incorporate expectations about the future, which means that there are no opportunities for investors to consistently outperform the market by analyzing past price patterns, also known as technical analysis.
In other words, the EMH suggests that a technical analyst's efforts to identify patterns in stock prices to predict future movements would be futile because stock prices already reflect all relevant information. This implies that the market is efficient and that it is not possible to consistently earn abnormal profits by using technical analysis.
For example, if a technical analyst believes they have identified a pattern or trend in a stock's price, the EMH suggests that this information is already factored into the price and has been analyzed by the wider market. Therefore, the analyst cannot use this information to consistently earn abnormal profits.