Dow Theory: 6 Basic Tenets. ... It relates a physical law to market movement, which states that an object in motion (in this case a trend) tends to continue in ...CMT®ProgramAbouttheProgramCMTLevelICMTLevelIICMTLevelIIIRemoteProctoringPoliciesandProceduresCMTLevelIWaiverRegulatoryRecognitionAcademicPartnerProgramParticipatingPrepProvidersTestimonialsMembershipBecomeaMemberMemberBenefitsDigitalBadgingDiscounts&ResourcesVolunteerOpportunitiesChaptersCMTIndiaLearning&EventsCalendar2021AmericasSummit2020IndiaSummitWebinarsPodcastsVideoArchivesResearch&AnalysisTechnicallySpeakingTechnicalInsightsMembersintheMediaJournalofTechnicalAnalysisAwardsAboutGovernanceCodeOfEthicsAcademicPartnerProgramPressRoomTAEFCommitteesAwardsVolunteerOpportunitiesPrivacyPolicyMyCMTMyAccountHistoricalTransactionsMemberDirectoryLoginJoinNowpublicDowTheoryBasicTenetsDowTheory:6BasicTenets1.TheAveragesDiscountEverything:Theideathatthemarketsreflecteverypossibleknowablefactorthataffectsoverallsupplyanddemandisonthebasicpremisesoftechnicaltheory.Thetheoryappliestomarketaverages,aswellasitdoestoindividualmarkets,andevenmakesallowancesfor“actsofGod.”Whilethemarketscannotanticipateeventssuchasearthquakesandvariousothernaturalcalamities,theyquicklydiscountsuchoccurrences,andalmostinstantaneouslyassimilatetheiraffectsintothepriceaction.2.ThemarketHasThreeTrends:Dowdefinedanuptrendasasituationinwhicheachsuccessiverallycloseshigherthanthepreviousrallyhigh,andeachsuccessiverallylowalsocloseshigherthanthepreviousrallylow.Inotherwords,anuptrendhasapatternofrisingpeaksandtroughs.Theoppositesituation,withsuccessivelylowerpeaksandtroughs,definesadowntrend.Dow’sdefinitionhaswithstoodthetestoftimeandstillformsthecornerstoneoftrendanalysis.Dowbelievedinthatthelawsofactionandreactionapplytothemarketsjustastheydotothephysicaluniverse.Hewrote,“Recordsoftradingshowthatinmanycaseswhenastockreachestopitwillhaveamoderatedeclineandthengobackagaintonearthehighestfigures.Ifaftersuchamove,thepriceagainrecedes,itisliabletodec