CHARTCRAFT Chartcraft · April 2026 · ~5 min

Dow Theory: the bedrock of technical analysis

Charles Dow never published a book called Dow Theory. He simply wrote editorials, at the turn of the twentieth century, for the newspaper he had founded. Later writers organized those scattered observations into a system — and it became the bedrock of technical analysis.

A few assumptions still in use

• Price reflects everything: known information, emotion and expectation are already in the price;
• Trends have three grades: primary, secondary reactions, daily noise — different in magnitude;
• Trends persist: assume continuation until a clear reversal signal appears;
• Averages must confirm: one index's move needs another to confirm it.

The market writes everything into price; the remaining work is to learn to read.

Why it's the "bedrock"

The trendlines you draw, the higher highs and lower lows, the volume confirmation — almost all trace back to Dow's handful of observations. It offers no buy and sell points; it offers a framework for seeing the market. That is what a foundation is: you rarely think of it, yet everything is built on top.