"Study of the averages is based on 'Dow's theory', propounded by the late Charles H. Dow, the founder of this newspaper. The books which published that theory seem to be out of print; but briefly it was this: Simultaneously in any broad stock market there are -- acting, reacting, and interacting -- three definite movements. That on the surface is the daily fluctuation; the second is a briefer movement typified by the reaction in a bull market or the sharp recovery in a bear market which has been oversold; the third and main movement is that which decides the trend over a period of many months, or the main true movement of the market.
"It is with these facts well in mind that the student approaches analysis of the averages, premising that broad conclusions are valueless on the daily fluctuation and deceptive on the secondary movement, but possible and helpful on the main movement of the market, and of real barometrical value to general business. It may be said as a matter of record that studies in the price movement, with these facts well in view, published in these columns from time to time and especially in the years before the war, were far oftener right than wrong, and were wrong for the most part when theyt departed from Dow's sound and scientific rule."
William Peter Hamilton, Aug. 1919 Wall Street Journal Editorial
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