Dow Theory Direction by Tim W. Wood, CPA
Why do opinions on Dow theory so often vary, and why do
Dow theory “signals” so often fail?
Typically, there is one common denominator that
becomes immediately apparent in most articles
about Dow theory: too many of the authors of
those articles have not studied the original writings
of Charles H. Dow, William Peter Hamilton, or Robert Rhea. These original writings and particularly
those of Robert Rhea are essential if we are to understand
what has come to be known as Dow theory. The only other
person I know who has studied the original writings by Dow,
Hamilton, and Rhea is Richard Russell. As a result, Russell
is the only other orthodox Dow theorist I know of, and he has
fought misquotes, misunderstandings, and erroneously written
articles about Dow theory his entire career.
NONCONFIRMATION AND THE ONGOING BEAR
I first warned about the Dow theory nonconfirmation, and the
impending bear market, in October 2007. There was approximately
a four-week period following the October 9, 2007,
closing high on the Dow Jones industrials that was a classic
“sell spot” in accordance with orthodox Dow theory. It was
during this time that I began warning my subscribers and
guided them through the developments as we watched the
primary bearish trend take root.