Stock Markets Analyzed 4U!

This article will start by mentioning some of the shortcomings of the Dow Theory, which is explained in detail in: My First Post Examining Dow Theory.   For example, the Dow Theory, on average, might miss around 20 to 25% of a move before generating a signal identifying it. For many traders this is too late. A Dow Theory buy signal usually occurs in the second phase of an uptrend as the price penetrates a previous intermediate peak.  This is about where most of the trend following technical systems begin to identify the existing trends.

There is never a time when the Dow Theory does not lend itself to presumptions as to questions concerning the direction of the primary trend, because this is an area that is highly prone to misjudgment, particularly at the beginning of each major trend and ensuing for a short time after when the answer given by Dow will usually be prove wrong. There will be a certain time then when the Primary Trend will be up according to Dow, but analysts may advise not to invest at that stage because the looks of the trend are showing on the trend being diminished somewhat and the smart investor better stay out, and the one who is already invested may wish to opt out at this point, being that there is a larger chance that the trend will fail.
However as you see in the Chart below, one can do pretty nicely for himself over the years if he buys and sells only of Dow Theory signals:

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