How old is the Dow theory? And are the 6 Dow tenets valid for todays market?

The Dow Theory is a fundamental concept in technical analysis that was formulated by Charles H. Dow, the co-founder of Dow Jones & Company, in the late 19th century. While it was originally proposed in the late 1800s, its principles and tenets have been widely studied and applied by market analysts and traders over the years.

The six tenets of the Dow Theory are as follows:

1. The market discounts everything: This tenet suggests that the stock market reflects all available information, including fundamental and technical factors.

2. The market has three trends: According to Dow Theory, the market exhibits three types of trends: the primary trend (long-term direction), the secondary trend (corrective movements within the primary trend), and the minor trend (short-term fluctuations).

3. The stock market averages must confirm each other: For a valid trend signal, the Dow Theory requires that the industrial average (e.g., Dow Jones Industrial Average) and the transportation average (e.g., Dow Jones Transportation Average) move in the same direction, confirming the strength of the trend.

4. Volume should confirm the trend: Dow Theory suggests that volume should increase in the direction of the primary trend. Rising volume during market advances and declining volume during market declines support the validity of the trend.

5. Trends persist until proven otherwise: The Dow Theory assumes that trends remain intact until there is clear evidence of a reversal. Traders should avoid attempting to predict trend reversals prematurely.

6. Trends are confirmed by other technical indicators: While not explicitly stated in the original Dow Theory, modern interpretations often incorporate the use of additional technical indicators, such as moving averages or oscillators, to confirm trends and generate trading signals.

Regarding the validity of the Dow Theory in today's market, it's important to note that no trading theory or approach is universally applicable or infallible. The markets have evolved significantly since the late 19th century, with the advent of technology, globalization, and new market participants. However, many traders and analysts still find value in the principles of the Dow Theory and incorporate them into their analysis.

While the basic tenets of the Dow Theory are still relevant, it's essential to combine them with other technical analysis tools, adapt them to current market dynamics, and use them in conjunction with fundamental analysis and other indicators. Traders often modify and customize the Dow Theory principles to suit their trading style and incorporate more contemporary approaches. As with any trading methodology, it's crucial to thoroughly understand its principles, test its effectiveness, and adapt it to the specific market conditions and individual trading strategies.