It was not until I firmly believed that Dow Theory was the only scientific method to date to predict stock market movements that I found sufficient confidence and reason to write a book on Dow Theory.
When a man works in bed for many years, as I have done, he has a rare opportunity, unavailable to others, of uninterrupted study and research, and life will lose its proper joy if this opportunity is not utilized and regarded as a precious gift to the fortunate.
For more than ten years, I have been doing all my business from my bed, my only recreation being the study of economic activity—particularly the study of economic and stock market trends. Perhaps because of the Dow Theory, or perhaps because of sheer luck, I bought some stocks at the right time in 1921. Then, in 1929, I was able to take profits and remain short. During the last stage of the 1929 stock market boom, I did not own any stocks. On the contrary, perhaps because of the Dow Theory or perhaps because of sheer luck, I held a small percentage of short positions for two years after the crash. Apparently my study has paid off. If I try to practice the Dow Theory and explain it with my own operations, others may benefit greatly. This is exactly what I hope.
For my own use, as well as for the convenience of my friends and those who are serious about studying the market, I set out to produce a set of daily charts of the Dow Jones Average, which also show the daily trading volume of stocks. Considering the high cost of printing a small number of copies, we adopted a large-scale printing method to sell this set of charts. Then there was a considerable sales volume, which was very satisfactory. In the publication notes of the charts, I made some comments on the Dow Theory and the article of Hamilton, the editor of the Wall Street Journal. Those comments soon produced unexpected results, and I received more than 500 letters of inquiry. It can be said that this book was written to a certain extent for those who wrote to consult. Through this book, readers can share my research results on the Dow Theory and benefit from it. Many of the consultants have now become my good friends.
There will certainly be criticisms of the book's wording and arrangement. There will probably be many readers who disagree with the book's conclusions and the terms it defines. But those who can tolerate the author's limitations will find something useful in this book that will benefit their trading. This book is written for them.
I would like to express my sincere gratitude to Mr. Hugh Bancroft for his preface to this book and for his generous authorization to use the Dow Jones Daily Average and all the articles published in his two great financial publications, The Wall Street Journal and Barron's.
--Robert Rea in Colorado Springs
