Dow Theory and the Beginning of Technical Analysis

Before the advent of technical indicators or modern analysis software, Charles Dow laid the foundation for what we know today as technical analysis in the late 19th century. Dow's theory is not just history; it's a fundamental rule upon which professionals still base their decisions.
🔹 The basic principles of Dow Theory:
The market moves in three directions: a primary trend, which can last for years; a secondary trend, which is a correction; and minor trends, which are daily fluctuations.
Prices reflect everything: news, expectations, liquidity... all appear in the price.
The trend persists until something changes it. A trend doesn't reverse simply because it has risen too high or fallen too low; it requires technical evidence.
🔹 Practical application: The TASI index: When it exceeded 12,000 points, it was in a major uptrend, while the drop to 11,600 points was merely a minor correction. Global Markets: The S&P 500 often adheres to Dow's principles, with major trends lasting for years (such as the 2009-2021 rally).
🔹 Dow's Relationship to Modern Technical Analysis: Moving averages are based on the idea of ​​a trend. Price patterns like the "double top" are a practical application of Dow. Even momentum indicators like the RSI and MACD confirm or deny a trend.
🔹 Conclusion: If you understand Dow's theory, you'll realize that every tool in technical analysis is just an elaboration on these principles. Dow gave us the map, and we just use different tools to read it.