Technical analysis of stock trends - 8th edition

chapter thirty-three
Tactical Review
of Chart Action
The Dow Theory
The record shows that an investor who had bought a representative group
of stocks on every Major Bull Market signal according to the Dow Theory
as outlined in Chapters 3, 4, and 5, and had sold all his stocks on every Major
Bear Market signal, since the start of the Dow Averages, would have come
out very well indeed over the years (EN: see tables, Chapters 5 and 5.1).
Although this tabulation does not take short sales into account, it would be
perfectly consistent to add that a representative group of stocks might be
sold short on every Major Bear Market signal and covered at the next Bull
Market signal. And if the figures for such short sales, based on the level of
the Industrial Average, were included, the total profits on these theoretical
transactions, both long and short, would be enormous.
We believe that this record carries some weighty implications which
have a bearing on the operations of every trader and investor. We will
comment on these shortly.
But before doing so, it should be pointed out that few, if any, investors
have actually followed the long-time Dow signals, buying or selling 100%
on every Major signal.
In the first place, to do so would require a long market lifetime, and
would presuppose that the investor had accepted the Dow Theory in its
classic form in toto from the start, and that he had never wavered, never
altered the definitions nor his method of trading, and that he had never
withdrawn any of his capital during the entire period.
In the second place, we would have to assume that our ideal investor
had an extraordinary degree of courage in order to stand firm in periods
during which the Major Trend appeared to be making dangerous threats
against his position, and an extraordinary degree of patience in order to wait
out the many months of stagnation when the trend seemed to be getting
nowhere at all.
And in the third place, we would have to make the assumption that the
group of stocks actually bought or sold really represented a fair cross-section
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