Dow Theory

Dow Theory is a financial analysis approach that interprets stock market movements to identify ongoing trends. It suggests that the market moves in three key phases: an accumulation phase (smart investors buy), a public participation phase (broader investor interest rises), and a distribution phase (smart investors sell). The theory emphasizes the importance of confirming trends across both the Industrial and Transportation Averages, meaning they should move together to signal a strong, consistent primary trend. It's used to help investors understand whether the market is in an upward (bullish) or downward (bearish) trend and to make more informed investment decisions.