Using the Dow Theory Today
Comments on “Charles Dow’s Theory Still Valid for the 21st Century,” by Jack Schannep, in the September 2012 AAII Journal:
In the sophisticated computer-driven market of today’s world, volatility reigns supreme. Too-big-to-fail investment firms with computerized algorithms can cause market disruptions and massive moves that destroy the basis for any theory, but this is a good lesson in how the market should work if an equal playing field existed (and it may work well—but for small and micro-cap stocks, if such a tracking system exists for them).
Since transportation stocks are less likely to be manipulated, they might be more important to follow than the industrials. And, in today’s world, the service and tech sectors play a much bigger role in our economy than they did in the past. Their relationships to the Dow must also be taken into consideration when investing wisely.
It is a much more complicated environment today than in the 1900s, when manufacturing ruled
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