From The Stock Market Barometer by William P. Hamilton, published in 1922

Stock Market Speculation and Prediction

Continued from...Dow's Account of United States Crises

A Weak Prediction

With a caution in prediction which is not merely New England but almost Scottish, Dow, in a typical final paragraph, goes on to say:

"Judging by the past and by the developments of the last six years, it is not unreasonable to suppose that we may get at least a Stock Exchange flurry in the next few years."

So far from being unreasonable, it was not even a daring guess. It was more than a "flurry" in 1907, five years after, when the New York banks resorted to clearing house certificates and the stock market grazed a panic by a bare five minutes. But the prediction was made during a primary upward swing which culminated in September of the year 1902, three months before Dow died.

Events soon disproved Dow's five-year primary swings, arrived at by splitting the assumed ten-year cycle in half. There was a primary bear market from September, 1902, lasting nearly a year. A primary bull market originated in September, 1903, becoming definitely marked by June, 1904, and culminating in January, 1907 - a period of three years and four months; while the primary bear market which followed it and covered the period of the crisis of 1907 lasted until the following December - a period of eleven months.

Nelson's Book on Speculation

All that Dow ever printed is in The Wall Street Journal, and only by search through the precious files of Wall Street's Bible can his theory of the stock market price movement be reconstructed. But at the end of 1902 the late S. A. Nelson wrote and published an unpretentious book called The A B C of Stock Speculation. It is long out of print, but may occasionally be picked up from the second-hand booksellers. He tried to persuade Dow to write the book, and, failing that, he incorporated in it all that he could find of what Dow had said on stock speculation in The Wall Street Journal. Of the thirty-five chapters in the book, fifteen (Chapters V to XIX inclusive) are editorials, some slightly abridged, from The Wall Steet Journal, covering such subjects as "Scientific Speculation," "Methods of Reading the Market," "Methods of Trading" and market swings generally - all of them interesting but not suitable for entire reproduction here, although they will be sufficiently quoted in subsequent chapters.

Nelson's is a conscientious and sensible little book. He was a conscientious and sensible little man - one we loved and laughed at, for young reporters could not take him as seriously as he took himself. His autographed copy lies before me as I write, and I can see his pathetic figure and earnest, strained face - he was dying of tuberculosis - as I read his rather conventional discussions on the morality of speculation. He died not long after, far away from his beloved Wall Street, but it was he who evolved the name of "Dow's Theory." It was an honorable ascription, to which Dow is fully entitled; for if many people had recognized meaning in traceable movements in the stock market - the great and useful barometer of trade - it was Dow who first formulated those ideas in a practical way.

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From The Stock Market Barometer by William P. Hamilton, published in 1922