The power and usefulness of Dow Theory has been doubted and sneered at since the early 1900s, but the effectiveness of Dow Theory has been proved over and over again.
Fed chief Ben Bernanke is learning about the power of Dow Theory as I write. A primary bear market started in October, 2007. There has been an extended intermission, but the bear market continues as I write. It's ironic that Bernanke has been concentrating on sending the Industrial Average higher, based on his thesis that a higher Dow will raise the spirits of the American people, and, this, in turn, will encourage Americans to buy more and consume more.
Bernanke is evidently unaware of one basic rule of Dow Theory, and that is that BOTH Averages must confirm each other in order to perpetuate the prevailing trend. For just this reason, I have drawn attention to the steady divergent action of the D-J ... Log in or subscribe to continue reading.
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