Page 21 - Module 4 - Trading_Ways_and_Means

Contents
1. The Dow Jones theory ..................................................................................................................... 1
2. Assumptions .................................................................................................................................... 2

Manipulation ....................................................................................................................................... 2
Averages Discount Everything ............................................................................................................ 2

Dow Theory Is Not Infallible ................................................................................................................ 4
3. Broad Market Movement Theorems .............................................................................................. 4

Market Movements ............................................................................................................................ 4
Primary Movement ............................................................................................................................. 5
Secondary Movements ....................................................................................................................... 5

Daily Fluctuations ................................................................................................................................ 7
4. The Three Stages of Primary Bull Markets ...................................................................................... 8

Stage 1 - Accumulation ....................................................................................................................... 8
Stage 2 - Big Move .............................................................................................................................. 8
Stage 3 - Excess ................................................................................................................................... 8

5. The Three Stages of Primary Bear Markets .................................................................................... 9
Stage 1 - Distribution .......................................................................................................................... 9

Stage 2 - Big Move .............................................................................................................................. 9
Stage 3 - Despair ................................................................................................................................. 9

6. Signal Theorems .............................................................................................................................. 9
7. Identification of the Trend ............................................................................................................ 10

Both Averages Must Confirm ............................................................................................................ 12
How Averages Confirm ..................................................................................................................... 13
8. The Role of Volume ....................................................................................................................... 14

Volume Confirmation ........................................................................................................................ 14
Volume and Reversals ....................................................................................................................... 14

Lines (a.k.a. Trading Ranges) ............................................................................................................. 14
9. Criticisms of Dow Theory .............................................................................................................. 15

10. Conclusions ................................................................................................................................... 16