The Dow Theory Today

I have read a dozen of books on investing and I can grade it one of the top five books so far. I liked every single line in this book -- to the point and well written.

I can only recommend all the classics that have been written on trading and the markets. Usually, they are far better, on the point and teach you the essentials. This is one of them. Keep studying the tape.

Richard Russell is one of the few 'old fogeys' (as Mark Hulbert likes to say) still analyzing the market who went through the last market top and then the 70s bear market. This book is a collection of a series of articles Russell wrote between 1958 and 1960, in which he successfully predicted that in 1958 the bull was still alive, and in 1960, that the bear market had started. This is a small book, concise, and is a good introduction to Dow's Theory--a method for timing the markets. Russell is still writing (http://www.dowtheoryletters.com) on the market. He is often dismissed as a perma-bear these days (he has been consistently bearish from 1999 till now, 2005, and says that the bull market of the last two years was only a temporary correction of a huge secular bear market), but seeing his earlier courageous call of the bull market continuation in 1958 is one reason I pay attention to him, and to the Dow Theory in general. For those who haven't heard of it, Charles Dow came up with a method for timing the markets. His successor at the Wall Street Journal, William Peter Hamilton, revised this method, and since then it has changed little. Unless you are a masochist, avoid Hamilton's book. Robert Rhea was another Dow Theorist and his book is another one that might be of interest. The key to Dow Theory is watching the movement of the stock averages, and everything that is useful will be reflected in those movements--knowledge of business, investor psychology, etc. The key is also values--stocks will tend to return to their average historical values (but always overshoot, going from undervalued to overvalued, and vice-versa). Anyway, for more info, read the book.

While most investment books cover the importance of trends, this book actually gives you an understanding of the motion of trends and the influence of the larger market represented by the Dow Jones Industrials and Transports.

This book will enable you to indentify the prevailing market trend and distinguish between temporary corrections and longer term trends.