The most important quote on Dow Theory (according to Jack Schannep) comes from Dow himself
"A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned. This method holds good in watching and determining the flood of the stock market.
The average of twenty stocks is the peg which marks the height of the waves. The price-waves, like those of the sea, do not recede at once from the top. The force which moves them checks the inflow gradually and time elapses before it can be told with certainty whether a high tide has been seen or not."
From Schannep, Dow for the 21st Century
Dow also said, in a related comment (same book)
"There is always a disposition in people's minds to think that existing conditions will be permanent. When the market is down and dull, it's hard to make people believe that this is the prelude to activity and advance. When prices are up and the country is prosperous, it is always said that while preceding booms have not lasted, there are circumstances connected with this one which make it unlike its predecessors and give assurance of permanency. The one fact pertaining to all conditions is that they will change."
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