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Chapter 4. Confirmation: A Powerful Anal... > The Dow Theory: Trends and Confirmat...

The Dow Theory: Trends and Confirmation

The genesis of the confirmation approach is found in the best-known technical indicator, the Dow theory. Charles Dow originated the concept of trend analysis of stocks in a series of articles he wrote between 1899 and 1902. These articles were published in the early editions of the Wall Street Journal, which Dow published with his partner, Edward C. Jones.

The full-fledged Dow theory grew from these early writings and was developed into today's application by Samuel Nelson, who expanded on Dow's original theories in his well-known 1902 book, The ABCs of Stock Speculation. Dow's successor as editor of the newspaper, William Peter Hamilton, first saw the potential for broader stock market applications of the theories originated by Dow and explained by Nelson. In 1926, Hamilton published a book of his own, The Stock Market Barometer. While Charles Dow originally intended his theories on trends to be applied to business cycles, Hamilton expanded the original concept of averaging stocks into what has become the Dow Jones Industrial Averages, or DJIA (along with the transportation, utilities, and composite averages).


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