Summary
- A brief background on Charles H. Dow
- Dow will now go to 9,531.11 before heading higher
- If falling below the 9,531.11 level, the Dow will go to the 7,197.60 level
Article Details
Charles H. Dow came up with a perspective about the direction of the stock market that was codified in S.A. Nelson's 1903 book The ABC of Stock Speculation. Although Dow never claimed to actually have a theory, Nelson felt that Dow's contribution to economics and finance was so important that it was worthy of being considered a "theory."
In order for Dow to gauge the health of the market and the economy it became necessary to build and index of stocks. This index resulted in the formation of the Dow Jones Industrial Average (Index.) Initially, the Dow Index composed of 12 railroad companies and now composes of 30 companies. Most modern market watchers consider the Dow Index less of an indication of the stock market and economy due the lack of companies in the index. In reality, Dow only wanted the best indicator or barometer of the stock market and the economy not the most diverse mix of stocks.
Dow's theory was later developed by individuals like William Peter Hamilton, Robert Rhea, E. George Schaefer and most recently Richard Russell. As important as the Dow Jones Industrial Average is for the world in determining the current health of the U.S. stock market so too should Dow's Theory be used for determining the future direction of the stock market.
After today's stock market action the Dow Jones Industrial Average closed at the level of 10,609.66. This is below the 50% Principal as devised by E. George Schaefer. The 50% principal indicates that if a stock or index falls below this level it will fall, at minimum to the 2/3 level of Dow's Theory. Right now the 2/3 level for the Dow Jones Industrial Average is 9531.11. If the Dow falls below the 2/3 level the next stop will be 7,197.60.Touc.
Charles H. Dow came up with a perspective about the direction of the stock market that was codified in S.A. Nelson's 1903 book The ABC of Stock Speculation. Although Dow never claimed to actually have a theory, Nelson felt that Dow's contribution to economics and finance was so important that it was worthy of being considered a "theory."
In order for Dow to gauge the health of the market and the economy it became necessary to build and index of stocks. This index resulted in the formation of the Dow Jones Industrial Average (Index.) Initially, the Dow Index composed of 12 railroad companies and now composes of 30 companies. Most modern market watchers consider the Dow Index less of an indication of the stock market and economy due the lack of companies in the index. In reality, Dow only wanted the best indicator or barometer of the stock market and the economy not the most diverse mix of stocks.
Dow's theory was later developed by individuals like William Peter Hamilton, Robert Rhea, E. George Schaefer and most recently Richard Russell. As important as the Dow Jones Industrial Average is for the world in determining the current health of the U.S. stock market so too should Dow's Theory be used for determining the future direction of the stock market.
After today's stock market action the Dow Jones Industrial Average closed at the level of 10,609.66. This is below the 50% Principal as devised by E. George Schaefer. The 50% principal indicates that if a stock or index falls below this level it will fall, at minimum to the 2/3 level of Dow's Theory. Right now the 2/3 level for the Dow Jones Industrial Average is 9531.11. If the Dow falls below the 2/3 level the next stop will be 7,197.60.Touc.
