Dow theory

Dow Theory

A theory which says the market is in an upward trend if one of its averages (industrial or transportation) advances above a previous important high, it is accompanied or followed by a similar advance in the other.

Notes:

The theory also says that when both averages dip below previous important lows, it's regarded as an indicator of a downward trend.

See also: Dogs of the Dow

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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.

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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.