Perhaps the most influential theory of the stock market over the last 50 years is that of the efficient market hypothesis. This theory, developed by Eugene Fama, stipulates that markets are rational and that all the available information is appropriately reflected in stock prices. As such, it is impossible for an investor to consistently beat the market on a risk-adjusted basis. The efficient market hypothesis is often discussed as having three forms: a weak form, a semi-strong form, and a strong form:

1. In the weak form, the market is efficient in the sense that you cannot use past information from prices to predict future prices. Information is reflected in stocks relatively quickly, and while technical analysis would be ineffective, in some scenarios, fundamental analysis could be effective.

2. In the semi-strong form, prices immediately reflect all relevant new public information in an unbiased manner. Here, neither technical nor fundamental analysis would be effective.
3. And finally, in the strong form, stock prices reflect all public and private information.

Based on these theories, there isn't much hope of making money by exploiting patterns in the market. But fortunately, while the market operates in a largely efficient manner on the whole, distinct pockets of inefficiency have been uncovered. Most of these tend to be ephemeral, but some have been documented as persisting. One of the most noteworthy—even according to Fama—is the outperformance of momentum strategies.