Dow Theory
From Reuters Financial Glossary
The term generally used to describe Charles Dow's ideas about stock market behaviour. Dow applied his ideas to the stock market averages (indices) he designed â?? the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA). His theories are widely recognized to be the foundation to many modern technical analysis disciplines. Dow Theory is also used specifically to describe one of Dow's theories â?? that a major trend in the US stock market has to be confirmed by a parallel change in the DJIA and DJTA.
