Dow Theory

Dow theory is often used as an indicator of when a bear market may be about to start.

Dow theory is named after the 19th century editor of the Wall Street Journal, Charles Dow. It is often used as an indicator of when a bear market may be about to start.

The idea is that when a downward trend in the Dow Jones Industrial average is confirmed by a downward trend in the Dow Jones Transportation average, firms are no longer shipping goods between each other, which indicates slowing activity and means that a new bear market has begun.

See Tim Bennett's video tutorial: What is an index?

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