Is Dow Theory Sending Us A Warning? by Michael D. Sheimo
Michael Sheimo, best known for books such as Dow Theory Redux and Stock Market Rules, tackles the age-old question of whether the Dow theory is still valid and if it is, is it really sending us a warning?
After more than a hundred years, are the concepts of the Dow theory still useful in determining stock
market strength? The Dow theory was arrived at by an evolutionary process over a period of several
years. At the turn of the century, Charles Henry Dow discussed stock trading ideas in the newspaper he
was both editor and publisher of, The Wall Street Journal . The discussions, which appeared in a section
called "Review & Outlook," involved analyzing stock price movements each day, prices conveniently
published in the Journal.
Concepts of what would eventually be called the Dow theory were presented after Dow's death in 1902
by managing editor William Hamilton, who succeeded Charles Dow. Hamilton's work occasionally had
errors and false signals but was believed reliable by many Journal readers. Hamilton used the theory to
correctly call the approaching bear market of 1929. Hamilton deserves credit for much of the
development of the Dow theory.