The Dow theory on stock price movement is a form of technical analysis that includes some aspects of sector rotation.
The theory was derived from 255 editorials in The Wall Street Journal written by Charles H. Dow (1851–1902), journalist, founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company.
The six basic tenets of Dow theory as summarized by Hamilton, Rhea, and Schaefer are described below.
Alfred Cowles in a study in Econometrica in 1934 showed that trading based upon the editorial advice would have resulted in earning less than a buy-and-hold strategy using a well diversified portfolio.
William Goetzmann, Stephen Brown, and Alok Kumar believe that Cowles' study was incomplete[1][2] and that W.P.