Working Money: Confirming Averages by David Penn DOW THEORY
What happens when the Dow industrials
go where the transports fear to tread?
One of the original tenets of Dow theory, and
one of the most misunderstood, is the notion
that the averages must confirm each other.
Generally speaking, this refers to the rising
and falling price action of two of the three
main Dow Jones averages, the Dow Jones
Transportation Average (DJTA) and the Dow Jones Industrial
Average (DJIA). These averages have existed since their original inception by Charles Dow, though the actual components of
the averages have changed greatly over the years as different
companies rose and fell from prominence in the American
marketplace (see sidebars on page 104).