We might never know what came first – the chicken or the egg- but we know that first came Dow Theory and then technical analysis.

Charles Dow founded Dow Jones & Company in 1882 and was one of the owners of the Wall Street Journal. Popular for his ability to break down complex financial theories to the public, he began publishing his ideas and theories in a series of articles in the Wall Street Journal.

It was unknown at the time, but Dow’s articles would come to be considered the origin story of technical analysis, and his ideas would often form the basis for many other technical tools and indicators used today.

It all began in 1884 when Dow published the first-ever stock market average – the Dow Jones Industrial Average. It consisted of 9 railroad companies and 2 manufacturing firms. At the time, these two sectors were considered good indicators for gauging the health of the economy.

Then, in 1897, he decided that it would be more reliable to split the average into two. So, he established an industrial index of 12 stocks and a railroad index of 20 stocks.

By 1928, the industrial index had expanded to 30 stocks – the same number of stocks that it has today. In fact, up until 2018, one of the original companies remained listed on the DJIA – General Electric.

The Dow Jones Industrial Index remains a leading benchmark for stock market activity almost 150 years later.

But that wasn’t the only thing that we can thank Charles Dow for.
In his WSJ articles, Dow outlines 6 basic principles. In this module, we will be looking at these tenets and their role in technical analysis.
Stay tuned!