Dow Theory
Categories: Financial Theory, Stocks
There's the overall average of the DOW 30 stocks over here…and the Dow Jones Transport index over here. Where one goes, generally the other follows.
That is...they are highly correlated in price.
Why? Well, originally the Dow transports were railroads which hauled all the crap that the dow industrials made. So you’d think that one would follow the other. Take a look at a caterpillar crawling.
One half goes forward. And the other follows.
Dow Theory is one of a gajillion black box crystal ball theories that chartists tried to use to predict how the stock market would run in the future, so that they could profit from those predictions.
Like all the other black box theories, they work...sometimes even very nicely for a while with high prediction levels…until they don't.
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Finance: What is the Dow Theory?10 Views
Finance allah shmoop what is dow theory Well it's a
push me pull you index Yeah like you know the
doctor do little lama thing with the overall average of
the dow thirty stocks here and the dow jones transport
index here where one goes well generally the other follows
that is they are highly correlated in price and one
is basically an indicator of where the other is heading
Why Well originally the dow transports were railroads which appalled
all the crap that the dow industrials made so you'd
think that one would follow the other And if the
push me pull you thing didn't work for you well
take a short look at this caterpillar crawling you know
like that one part goes forward and then the other
follows Well dow theory is one of a good gillian
black box crystal ball theories that charters tried to use
to predict how the stock market would run in the
future so that they could profit from those predictions And
like all other black box theories they work sometimes even
very nicely for a while with high prediction levels That 00:01:08.293 --> [endTime] is well until they don't No