01 · Dow — Market Geometry

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.

Educational content on classic market theory — not trading advice.