Dow Theory  |  MAY 2002

Working Money: Confirming Averages by David Penn

Working Money: Confirming Averages by David Penn DOW THEORY What happens when the Dow industrials go where the transports fear to tread? One of the original tenets of Dow theory, and one of the most misunderstood, is the notion that the averages must confirm each other. Generally speaking, this refers to the rising and falling price action of two of the three main Dow Jones averages, the Dow Jones Transportation Average (DJTA) and the Dow Jones Industrial Average (DJIA). These averages have existed since their original inception by Charles Dow, though the actual components of the averages have changed greatly over the years as different companies rose and fell from prominence in the American marketplace (see sidebars on page 104).

by David Penn