CHARLES DOW
THE SIX TENETS · A ONE-PAGE FIELD GUIDE
CLEAREX.MARKET
FOUNDATIONS_01
1851 — 1902
THE SIX TENETS
1
The averages discount everything. Price already holds every known fact — trade the line, not the news.
2
Three movements. Tide (years) · Wave (3 wks–3 mos) · Ripple (days). Ride the tide; ignore the ripple.
3
Three phases. Accumulation → Public participation → Distribution.
4
The averages must confirm. One index alone is a solo witness — wait for the second to agree.
5
Volume confirms the trend. A real move carries mass; a dry break is thin paper waiting to tear.
6
A trend persists until broken. Only the loss of the last protected low/high (the MSB) reverses it.
THE THREE PHASES
BULL: quiet box (smart money gathers) → clean 45° advance (public arrives) → churn at the highs (distribution).
BEAR (mirror): distribution → panic → despair — where the next accumulation quietly begins.
READING THE TAPE
MSB — the last HL (or LH) gives way. The one definitive reversal signal. Everything else is a warning.
Confirmation — Industrials ↔ Transports (today: index↔breadth, BTC↔ETH). Need not be the same day.
Volume — must swell in the trend's direction and dry on the counter-move. Confirms; does not lead.
50% principle — half the prior advance is strong support; losing it is a bear signal.
Secondary reaction — retraces 33–66% (often ~50%) of the tide, then resumes.
GLOSSARY
HH · HL — higher high / higher low: the bull staircase.
LH · LL — lower high / lower low: the signature of weakness.
THE LINE — a sideways band (~5%, weeks) that stands in for a reaction; a break signals direction.
BREADTH (A/D) — advancers vs decliners: how many stocks carry the move.
DOW DIVISOR — 1896: sum of 12 prices ÷ 12; an adjusted divisor keeps one series from 40.94.
THE ONE RULE
Never take the big loss. Trade with the tide, demand confirmation, and exit on the MSB.
CLEAREX.MARKET · FOUNDATIONS_01 — CHARLES DOW EDUCATIONAL · NOT TRADING ADVICE