Dow theory


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Related to Dow theory: Technical analysis

Dow Theory

Used in the context of general equities. Technical theory that a major trend in the stock market must be confirmed by simultaneous movement of the Dow Jones Industrial Average and the Dow Jones Transportation Average to new highs or lows.

Dow Theory

In technical analysis, a theory stating that when the Dow Jones Industrial Average and the Dow Jones Transportation Average both hit a new high or a new low for a period of time, it can confirm a previous, bullish or bearish signal. It is important that both the averages must reach a new high (or a new low) in order to confirm the trend.

Dow theory

A technical trading theory that holds that stock market price trends can be forecast based on price movements of the Dow Jones Averages (industrials and transportation). The theory classifies price movements into individual components of primary, secondary, and daily. Only when both averages reach new highs or lows (one average confirms the other) is a major trend in progress.

Dow theory.

Dow theory maintains that major market trends depend on how the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average behave.

They must move simultaneously in the same direction until they both hit a new high or a new low in order for a trend to continue.

Some experts discount the relevance of this approach as a useful guideline, arguing that waiting to invest until a trend is confirmed can mean losing out on potential growth.

References in periodicals archive ?
His interpretation of the Dow Theory did a better job of navigating the 2007-2009 bear market and subsequent bull market than any of the nearly 200 other stock market timing strategies monitored by the Hulbert Financial Digest.
On the positive side, Dow Theory notes that the Food and Drug Administration approved a record 440 generic drugs in 2007, more than double the number approved a decade ago.
Basing speculations on the Dow Theory, if the stocks have gone higher than the previous peak, the Dow Theory adherents should buy, because they are likely to profit.
The investment newsletter Dow Theory Forecasts indicates that it expects slow sales growth for retailers in 2008, because consumers have become less willing to spend.
Horizon produces a range of related newsletters, including Dow Theory Forecasts, The DRIP Investor and The Pure Fundamentalist.
The Dow Theory of Markets, which beat out the other methods from 1900 to 1937, after 1937 never did perform very well at all.
Although technicians have created dozens of methods for charting stocks, the modes most used by technicians include the Dow Theory, the McClellan Oscillator and the Elliott Wave.
The onus is on bulls to prove their point,'' said Charles Carlson, editor of the Dow Theory Forecasts newsletter in Hammond, Ind.
So the question for the Possibility Theorem is whether publication of the Dow Theory before trading opens will cause a significantly different movement in the market that day than if the Theory weren't published.
The various ups and downs are responsible for the bottom line of Dow Theory Forecasts Inc.
Technical Analysis will take you through basics such as the Dow Theory, types and patterns of charts, mathematical indicators and will round it off with some tips on investment.
One of the longest-lived theories about the stock market is the so-called Dow Theory, which holds that when the Dow Jones Industrial Average and the Dow Transportation Index are making new highs in lockstep, they are signaling not just a bull market but one with real staying power.