what is the dow theory 
the dow theory is a financial theory that says the market is in an upward trend if one of its averages e g industrials or transportation advances above a previous important high and is accompanied or followed by a similar advance in another average for example if the dow jones industrial average djia climbs to an intermediate high an investor might watch the dow jones transportation average djta climb to confirm an upward trend investopedia zoe hansenunderstanding the dow theorythe dow theory is an approach to trading developed by charles h dow who with edward jones and charles bergstresser founded dow jones company inc and developed the dow jones industrial average in 1896 dow fleshed out the theory in a series of editorials in the wall street journal which he co founded charles dow died in 1902 and due to his death never published his complete theory on the markets but several followers and associates have published works that have expanded on the editorials some of the most important contributions to dow theory include the following dow believed that the stock market as a whole was a reliable measure of overall business conditions within the economy and that by analyzing the overall market one could accurately gauge those conditions and identify the direction of significant market trends and the likely direction individual stocks would take aspects of the theory have lost ground for example its emphasis on the transportation sector and railroads but dow s approach forms the core of modern technical analysis 