According to Charles H. Dow, the primary trend of the market is the broad, all-engulfing 'tide,' which is interrupted by 'waves,' or secondary reactions and rallies. Movements of smaller size are the 'ripples' on the waves. The latter are generally unimportant unless a line (defined as a sideways structure lasting at least three weeks and occurring within a price range of five percent) is formed. The main tools of the theory are the Transportation Average (formerly the Rail Average) and the Industrial Average. The leading exponents of Dow's theory, William Peter Hamilton, Robert Rhea, Richard Russell, and E. George Schaefer, rounded out Dow's theory but never altered its basic tenets.
Frost and Prechter, Elliot Wave Principle
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