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What would Charles Dow say about today's stock market?

by Murray Gunn
Updated: July 06, 2021

"'Wall Street never changes,' said Jesse Livermore, the legendary 'boy plunger' trader. 'The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.'

"Livermore's trading life started towards the end of the 1800s, just as Charles Dow was writing about the stock market in his Wall Street Journal. Dow's writings became known as Dow Theory, and a central tenet of it is that an uptrend in the stock market has three phases: accumulation, participation and distribution. During the accumulation phase, strong hands (the minority) are buying from weak hands (the majority). As the uptrend grows, the public become increasingly participatory until, in the distribution phase, manic speculation takes hold and the strong hands sell (distribute) to the weak hands, who want in at any cost. Elliott wavers will, of course, recognize these three phases as being consistent with waves 1,3 and 5 of an advancing impulse wave in the stock market."

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