Did Dow Theory just trigger an important sell signal?

You know how skeptical I am of market maxims and rules of thumb and pattern recognition in general…

At best, these “signals” work sometimes and there are too many variables that are exogenous to the signal – so that a practitioner cannot know when it’s about to work and when it’s not. They can take a bow in hindsight on a signal foreseen but if things don’t play out, no one really remembers anyway – so it’s kind of like a free call option on pundithood.


I still think there is value in understanding the concepts behind what large segments of the crowd are looking at / watching / discussing. Can’t be a skeptic based on no information and have your skepticism taken seriously.

Which brings me to Dow Theory. I don’t believe in it, but I’m not an expert on how it’s meant to be used and interpreted. Two friends of mine have written it up this weekend and I’m reading both takes. Directing you to JC Parets and Larry McDonald below, make your own decision about what any of this might mean:

Dow Theory is something that gets thrown around a lot, usually irresponsibly. What I mean is, that there is a lot more to Dow Theory that what you normally hear about on the TV or read about on the Internets. Usually, conversations about Dow Theory revolve around the Dow Jones Industrial Average and Dow Jones Transportation Average either confirming or not confirming each other’s trends. This is indeed part of Dow Theory, but not even

Keep reading this article on The Reformed Brocker.