Reply #2: Market WrapUp: The Dow Theory

[ozymandius]

BY TIM W. WOOD

Back in August when both the Industrials and the Transports moved down below their June lows, many were calling that a Dow theory sell signal. I wrote here in early August that this was not the case. It is now time for another update on Dow theory.

First, let’s begin with a direct quote from Robert Rhea, who was the leading Dow theorist in the late 1920’s and 30’s. “Under Dow’s theory the primary trend, once authoritatively established as bullish, is considered to be continuing in force until negated by a confirmed bearish indication such as would be the case when, after a reaction of full secondary proportions in a bull market, a rally fails to lift both averages to new high ground, and a later decline carries both averages below the preceding secondary low.”

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http://www.financialsense.com/Market/wrapup.htm