William Peter Hamilton. Dow theory

William Peter Hamilton. Dow theory

William Peter Hamilton, the future executive editor of "The Wall Street Journal" and "Berronz", was born in Scotland, a young man he worked as a clerk on the London Stock Exchange, then correspondent for the "Pall Mall Gazette" (Pall Mall Gazette). But like his countryman Scot B. Forbes, Hamilton sought adventure in South Africa, where he served in the British Army, worked as a war correspondent and unprofessional fond Johannesburg stock market. In 1899 he cameto the United States and joined the staff, "The Wall Street Journal." In 1908, Hamilton became editor of the editorial pages, "VDM Street Journal" and the current executive editor, on whose post and stayed Ao his death. Hamilton also worked as executive editor of the magazine "Berronz" from the first day of its release in 1921.

Clarence W. Barron (very impressive growth in person 5 feet 5 inches and weighing over 300 pounds) in 1902 bought a controlling stake, "Dow Jones & Company" (Dow Jones & Company). "He was the most striking worker, whom I have ever seen - he wrote Hamilton. - He started a conversation with me, while continuing to deal with two secretaries and answering the calls of the two phones." Bright character Barron had an impact on Hamilton and his editorials, which were once described as "polite and calm", have become more acute. Hamilton made his big step as a writer in 1922 when he wrote the book "Stock Market Barometer" (The Stock market Barometer), very well received, which represented his interpretation of the Dow Theory.

Before Charles Dow died in 1902 at Hamilton took with him a number of conversations concerning the behavior of the stock market, and in 1929 it became apparent effect. October 15, he warned of "speculative frenzy" on Wall Street. Then, on October 25, just days before Black Tuesday, Oct. 29, in an editorial entitled "The Turn of the current" (A Turn in the Tide), he stated that the bull market ended, he pi-caA: "According to the well-known method interpretation of the movements of the stock market for Dow Jones late Charles H. Dow, Wednesday, October 23, twenty shares of railway companies have confirmed signs of a slide in shares of industrial enterprises presented two days ago. " In the "Dow Theory" (The Dow Theory) critically examines the ideas of Hamilton, Charles Dow and wrote as they can be used to exclude from the investment element of gambling.



English economist, whose sincere humanism has always done his work remarkably interesting, the late William Stanley Jevons, offered a theory about the link between panic and commercial spots on the sun. He presented a series of dates from the seventeenth century, showing the obvious coincidence of two phenomena. Quite humanly, and charming that he preumenshil pretty ugly financial difficulties of two centuries ago, because at that time there were not enough spots on the sun. In early 1905 I published an article in "The New York Times' critical review of the theory of Jevons, which said that while in the shower the people who work on Wall Street, believe in the cycle of panic and prosperity, they do not care whether there is sufficient number of sunspots to make a straight flush. Youth reckless and disrespectful, probably more polite to say that the random periodic relationship does not prove anything like an exact match of the presidential elections in leap years.


Cycles and Poets
Many professors of economics, and many businessmen do not even claim a more modest title of the student, have a deep and robust belief in the existence of cyclicity in the affairs of man. Do not want to understand Einstein's relativity theory, to see the world in its moral development can not proceed in a straight line. The movement will at least resemble a trip around the sun in our world, which, together with his companions-the planets moving in the direction of the constellation Vega. Poets definitely believe in the theory of cycles. Byron is a great place in his poem "Childe Harold's Pilgrimage," which, to his credit, to be read from the preceding apostrophe to the tower of Metals. Here is Byron's cycle:

Here are stories of humanity vcex morality: The past no more than repeat, first, freedom, followed by fame, and when the hopes deceived - Wealth, evil, corruption, barbarism at the end, And the story in all of its volumes will take you no more pages.

Apparently, there are cycles of panic and time of prosperity. Anyone with a working knowledge of modern history will list the dates of our panic - 1837, 1857, 1866 (Overenda panic-Garni in London), 1873, 1884, 1893, 1907, though, even well posomnevavshis, add the deflationary 1920. Years of Panic shows at least intermittent spacing between them, from ten to fourteen years, and it is clear that the intervals tend to lengthen ...


FREQUENCY
However pragmatichesky foundation of this theory, the working hypothesis, at least, is in human nature itself. Prosperity encourages people to increase activity, and repentance for the consequences of such expansion are generated by depression. Following an hour of absolute zilch black workers would be grateful if they could get something and will be slowly reduced delay of its earnings, while capital owners will be content with small profits and quick income. There will come a period of restructuring, reorganization like the one the majority of American railroads after the panic of 1893. Today, we find that our revenues exceed expenses, the money cheaper, which in the air the spirit of adventure. We are moving from the time of sluggish or quiet business in this activity. It gradually develops into a broad speculation, the high cost of money sharply increased earnings and other familiar symptoms. After several years of good times voltage circuit has at its weakest link. Collapses like the one that was in 1907, depression, predicted the stock market and commodity prices, followed by huge unemployment, rapid growth and real growth of deposits in savings banks, but the complete lack of money available for adventures.


THE NEED FOR BAROMETER
Reread again Byronic lines and see if it makes a comparison to think about. What would have cost a discussion about business, if we could not bring her at least a bit of poetic imagination? Unfortunately, crises are caused by too much imagination. What we need, so it's soulless barometers, price indexes and averages that would speak to us where we are going and what we can expect. The best, because he is impartial, the most ruthless of these barometers is the average price recorded on the stock exchange. With the variable components, and at an early stage, with fewer shares, but always within thirty or more years of the data stored in the "Dow Jones News Service."

There is a method of reading that brings good results, although this reading is sometimes irritating as the optimist and the pessimist. Barometer predicts bad weather for an absolutely clear sky. It is useless to threaten to shower with an ax because he would destroy the crops of cabbage in the garden poor Mrs. Brown. In the past I have had the fate to discuss these averages in the press over the years based on the proven theory of the late Charles H. Dow founder of the newspaper "The Wall Street Journal." May not be very appropriately say that the analysis of price movements turned out to be really useful, but always the one who dares to such a discussion, who read a barometer, he learns to take into account the natural indignation at himself because of the dead cabbage Mrs. Brown.


Dow Theory
The Dow Theory is essentially simple. It shows that the stock market at the same time, there are developing, the three movements. The biggest - the basic movement, such as the bull market. He began his re-election McKinley in 1900 and culminated in September 1902, lingering, but not stopped because of the well-known stock market panic, which was a consequence of the "Pacific Cevepo Corner" in 1901, or primary bear market, which has developed in the area October 1919 and culminated in the June-August 1921.
We show that this is the main motion tends to the existence for at least one year, and usually much longer. Simultaneously, or in the course of it, there is a second movement Doe, represented by sharp recovery in the most bearish market and sharp reactions on the primary bull market. A striking example is the recent sharp fall in stock May 9, 1901. In these secondary movements of industrial shares (taken separately from the rail) can resume its growth is much faster than rail or rails to be, and hardly worth talking about, that twenty active railroad stocks and twenty industrial stocks, moving along, will not be move point to point even in the ground motion. In the long term increase that preceded the bear market that began in October 1919, railroad stocks fell in price and were relatively inactive and unclaimed, apparently because due to government ownership, and guarantees at the time they were practically out of the speculative field and did not have normal effect on speculative barometer. Following the resumption of private possession, they will seek to return most of its former value.


IMPACT THEORY
It is clear that both the main and secondary market movements continuously throughout the time there, as pointed out by Dow, the daily fluctuations. It must be said that the speculation individual stocks index is misleading. Whatever happened to the speculators, who believed that the reaction of the secondary motion occurs in May of 1901, as foreshadowed indexes, and if he could, believing in it, of all the stocks selected for the short sale of shares "Notern Pacific"? Some traders did, and they were lucky if they closed down, losing sixty-five points.

In practice, the Dow Theory has many manifestations. One of the most trusted - the two indices are mutually reinforcing and there is no such ground motion and the motion is rarely recycled, where they would not match. The study indicators index shows that there are times when fluctuations in the weeks are in narrow ranges, such as in situations where industrial action is not sold below or above the seventy seventy-four, and railway shares are not sold above or below the seventy-seven seventy three. In a technical sense, this is called "building line", and experience shows that this means the period or the distribution or accumulation, when the two indices rise above the highest point of the line, this is a strong bullish sign. This may mean a secondary recovery in a bear market, in 1921, this meant the official start of the primary bull movement will continue until 1922.

However, if the two indices would break through the lower level, it is obvious that the market shares achieved what meteorologists would call a "saturation point". It should be precipitation - cinnamon bear movement in a bull market or the beginning of the main downward movement of the kind that occurred in October 1919. After closing the Stock Exchange in 1914, the number of industrial stocks, selected for comparison has been increased from twelve to twenty, and it seemed that the indices Budug upset, especially when the impressive movement of stocks, such as "General Electric", did variations of industrial stocks is much more expressive than rail. But people who study the indexes back into the past with twenty-selected stocks and found that fluctuations in the twenty shares in previous years, almost every day coincide with the registered variations of twelve stocks, selected initially.


STANDARD Dow Jones
Dow Jones is still the standard, even though it simulates a very broad way. There are different ways of reading it, but nothing has stood the test applied to the Dow Theory. The weakness of any other method that are introduced alien to the facts because of their attractive importance. Makes it unnecessary to attempt to combine sales and to treat the index referring to the index of commodity group. But it should be obvious that the indices have already taken these things into consideration, as a barometer considers anything that affects the weather. Price movement is cumulative knowledge of Wall Street and in addition, the combined knowledge of upcoming events.

No one on Wall Street does not know everything. I knew people who were at the time of Henry H. Rogers was taken to call "crowd Standard oyd," and they are invariably wrong for years on the stock market. It's one thing to have "inside information", but quite another - to know how to react to this action. The market is all that everyone knows what the hopes, he believes, what to expect, and all of this knowledge are screened until the remains that Senator Dolliver once described by citing an editorial, "The Wall Street Journal" in the U.S. Senate, ruthless the verdict of the market.


Dow Theory IIPHMEHITEJIbHO to speculation
... Dow Theory on the movement of prices of the stock market ... can be summarized in three sentences. In an editorial crane "The Wall Street Journal," published December 19, 1900, he says:

The market should always be viewed as having three movements, and they are all in the same time. The first - limited movement from day to day. The second - a short swing from dvyx weeks to a month or more, and the third - the main motion, covering in length at least four years.

We have already shown that the third major movement of stock prices can be completed much sooner than proposed by Dow four years, and that the attempt to divide the ten-year cycle theory of panic in bear markets and bull about five years, each leading to an involuntary exaggeration. However, it does not matter. Dow successfully formulated the theory of motion of the stock market the most important company, and so these movements are synchronized, that those who came after him were able to build an economic barometer.


TRUTH about speculation
This is the essence of the Dow theory, and it is hardly necessary to say that he did not see or did not live to see what she means. He has never written a single editorial in theory, but returned to it, to illustrate their stories of speculation in the stock market and the basic facts and truth are responsible not only for speculation (using the word in its best and most useful sense), but for the market itself.

It is not surprising that the newspaper "The Wall Street Journal" has received many inquiries about the assumptions made on the basis of the main parcel Doe. January 4, 1902 Dow is responsible for the relevant question, and any reader who thinks of these lines should be in a position to answer it. The correspondent asked him: "Some time you characterize the current market as very bullish, although a bit bearish in a larger sense. How do you combine?" Of course, Dow said that the market was bullish after a second oscillation, but he did not think, taking into account the value of the shares on the basis of reported profits, the bull market that has existed sixteen months, would last longer. Incidentally, it was a curious decrease in its own minimum of four years, but the important upward turn, by the way, lasted until the following September. We can say that such an oscillation is always ahead of the cost. In its final stages, it provides only a discount possibility.


BUSINESS DEFINITION
In the same article, the Dow has another useful definition from which to draw the right conclusions. He says:

Bullish period lasts as long as each new high for the index is greater than its previous highs. And in a bearish period, each new low is lower than previous lows. It is often difficult to judge whether the end of the growth came because the movement of prices is as it would if the primary trend has changed. And yet it may be only an unusually strong secondary movement.

This passage implicitly contains the idea of ??a "double highs" and "double-minimum" (which I honestly confess that I do not find a significant or very useful), and the idea of ??"lines", which is manifested in the narrow fluctuations of the index over a specified period, or necessarily in the period accumulation, or during distribution. This proved to be a huge help to show the future prospects for the main motion, or possible termination of the secondary movement, which mistakenly be taken as the beginning of a new primary trend.


Divination