The Dow Theory The Dow Theory was established from a series of Wall Street Journal editorials authored by Charles H. Dow from 1900 until the time of his death in 1902. Today, even after 110 years they remain the foundation of what we know today as technical analysis. Dow never published his complete theory, but several of his followers compiled his works and that has come to be known as "The Dow Theory”. The Dow Theory has six points: The stock market discounts all news The Dow Theory suggests that all information (of the past, present or future) is factored into the prices of stocks and indexes. It includes all micro and macro economic factors ranging from inflation to earnings. It also includes events that are expected to happen and could happen. New information that has not been factored into get factored in as soon as they are available. A market has three trends The Dow Theory identifies three trends within the market- major, intermediate and minor. A major trend may last for less than a year to several years. An intermediate trend, which is often a reaction to the primary trend, may last from ten days to three months. A minor trend lasts less than …show more content…
That is in an uptrend, volume should increase when the price rises and fall when the price falls. When volume increases in the direction of the trend it shows that traders are in the belief that the momentum in the trend will continue. Likewise, low volume during the corrective periods of primary the trend shows that most traders are not willing to close their positions because they believe the momentum of the primary trend will continue. If volume runs counter to a trend, it is a sign of weakness in the existing trend signalling that the trend is starting to dissipate as the participants are losing conviction in the
In October 1929, the United States stock market crashed due to panic selling. This crash started a rippling effect that contributed to a worldwide economic crisis called the Great Depression. This crash was such a shock because of the economic expansion of the 1920’s when the Dow Jones average reached an all-time high of three hundred eighty one. The year 1928 was a time of optimism and the stock market had become a place where everyday people truly believed that they could become rich. People everywhere were talking about the market and newspapers were reporting stories of ordinary people such as chauffeurs, maids, and teachers making millions off the stock market.
Finally, investors went into “panic mode” on October 24th, 1929, and began trading and dumping their shares, totaling a record of 12.9 million. Of course, following “Black Thursday,” the more well-known “Black Tuesday” ensued as a result of this. Between Black Monday and Black Tuesday, the market lost 24% of its value, and investors bought and traded over 28.9 million stocks. These stocks, now worthless, were used as firewood for some investor’s homes. The Dow Jones Company is perhaps the greatest example for this crash. Dow Jones started at 191 points at the beginning of 1928, then more than doubling to 381 points by September 1929. The crash caused their record 381 points to plummet to less than 41 p...
is based on actual events, which helps in showing the accuracy of the events. The
The Market Revolution was one of the most important changes of American society before 1850. It was the adoption of a nation wide commercial change that would later alter all the different societies within the country. Wilentz described this period as the development of a market based economy and the dramatic changes in America’s behavior during the first half of the nineteenth century. Collectively, Sean Wilentz wrote about how historians argued about the topic of the market revolution and how each part of the country was affected by this time period and the changes that resulted.
During the late 1700’s, the United States was no longer a possession of Britain, instead it was a market for industrial goods and the world’s major source for tobacco, cotton, and other agricultural products. A labor revolution started to occur in the United States throughout the early 1800’s. There was a shift from an agricultural economy to an industrial market system. After the War of 1812, the domestic marketplace changed due to the strong pressure of social and economic forces. Major innovations in transportation allowed the movement of information, people, and merchandise. Textile mills and factories became an important base for jobs, especially for women. There was also widespread economic growth during this time period (Roark, 260). The market revolution brought about economic growth through new modes of transportation, an abundance of natural resources, factory production, and banking and legal practices.
The rising of the market economy occurred between the end of the War of 1812 and the Civil War. It was a time of uprising for Americans of the United States. There were changes in the vast improvement in transportation, the growth of factories, and there were important developments of new technology that increased agricultural production. Americans advanced into new areas and produced an agricultural surplus that went to market farming. In the nineteenth century, manufacturing was the most important factor because it brought about industrialization. The expansion of both economic and technological advances also brought about the changes in American society. The growth and eventual dominance of market capitalism in the United States changed the lives of all Americans fundamentally. The Market Revolution and the rise of market capitalism influenced the working class because of new inventions, like the cotton gin, and it encouraged farmers to raise more cotton in the South, and brought people in the North greater opportunities in the work field.
In early 1928 the Dow Jones Average went from a low of 191 early in the year, to a high of 300 in December of 1928 and peaked at 381 in September of 1929. (1929…) It was anticipated that the increases in earnings and dividends would continue. (1929…) The price to earnings ratings rose from 10 to 12 to 20 and higher for the market’s favorite stocks. (1929…) Observers believed that stock market prices in the first 6 months of 1929 were high, while others saw them to be cheap. (1929…) On October 3rd, the Dow Jones Average began to drop, declining through the week of October 14th. (1929…)
There are three different general trends (directions to prices or rates) in the economy. " Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price Index, industrial production, bankruptcies, GDP, stock market prices, money supply changes, and housing starts also called business indicators." http://www.investorwords.com/1643/economic_indicator.html.
At the U.S. Science Convention of 2011, the dire prediction was made that by 2050, we will have an “unrecognizable” planet by virtue of a huge population competing for a deficient number of resources. It is envisioned that the global population will climb to nine billion by 2050. Due to the increasing population, “we will need to produce as much food in the next 40 years as we have in the last 8,000,” said Jason Clay at the yearly meeting of the American Association for the Advancement of Science (AAAS). The only effective solution is to “minimize population growth…through more effective family planning”. We are now witnessing the truth that lied behind the theory of the economist, Thomas Malthus, who foreshadowed the increase of population with minimal resources to support it.
...e outcomes. Additional forecasts on what happens next will also support the scientific standard for prediction of future events.
The report of Robert Reich: “Why the Rich are getting Richer and the Poor, Poorer,” is an eye opener and a warning for society regarding unemployment that it will be facing and is currently facing due to a lack of technology and education. It clearly articulates that the jobs of routine producers and in-person servers have vanished totally as modern techniques have replaced them. The author has stated that the only people whose jobs are on the rise are symbol analysts. As stated in the report, symbol analysts are the real problem solvers. Their skills are highly in demand worldwide because they are the ones who first analyze the problem and then solve it.
...s the example of the price of the gold to determine the relationships between the Linear Algebra and the Financial World. The uses of the financial concepts and the mathematics equations generally support the author’s aim of the price changing in different period of time. As the mathematics research article, it has clearly uses the symbols and equations to support the point of view of the author which shows the result of the element of the completed market and the changes of the price. However, it is not easy for a people who lack of mathematics knowledge to understand the concepts and equations of the mathematics. It will be easier for them to read and understand the author’s explanation if there are more explain on the equations or more wording explanations. Overall, Barbara Swart had been clearly explained the relationship of Linear Algebra and Financial World.
In the novel The Island of Dr. Moreau a lot of events happen in times and areas where it is unlike for such events to happen, despite they do happen. Like the shipwrecked with another boat in and part of the relatively untraveled part of an ocean although it does happen and the first event of entanglement happens. Without the two ships colliding Edward Pendrick would have never been shipwrecked and therefore not found by one of the mad scientist Dr. Montgomery. Also without that certain event the novel The Island of Dr. Moreau also would have happened. Nonetheless throughout the novel the chances of highly unlikely events are getting more and unpredictable.
Chapter 11 closes our discussion with several insights into the efficient market theory. There have been many attempts to discredit the random walk theory, but none of the theories hold against empirical evidence. Any pattern that is noticed by investors will disappear as investors try to exploit it and the valuation methods of growth rate are far too difficult to predict. As we said before the random walk concludes that no patterns exist in the market, pricing is accurate and all information available is already incorporated into the stock price. Therefore the market is efficient. Even if errors do occur in short-run pricing, they will correct themselves in the long run. The random walk suggest that short-term prices cannot be predicted and to buy stocks for the long run. Malkiel concludes the best way to consistently be profitable is to buy and hold a broad based market index fund. As the market rises so will the investors returns since historically the market continues to rise as a whole.
Financial theories are the building blocks of today's corporate world. "The basic building blocks of finance theory lay the foundation for many modern tools used in areas such asset pricing and investment. Many of these theoretical concepts such as general equilibrium analysis, information economics and theory of contracts are firmly rooted in classical Microeconomics" (Oaktree, 2005)