Further confirmation of a change in trend came in the form of a new reaction high with high volume on Oct-15. In hindsight, it would appear to be a secondary move. Hamilton characterized secondary moves as a necessary phenomenon to combat excessive speculation. Corrections and counter moves kept speculators in check and added a healthy dose of guesswork to market movements. Because of their complexity and deceptive nature, secondary movements require extra careful study and analysis.
Investors often mistake a secondary move for the beginning of a new primary trend.
This issue will be addressed in Part 3 of this article, when we analyze the various signals based on Dow theory. Daily Fluctuations Daily fluctuations, while important when viewed as a group, can be dangerous and unreliable individually. Due to the randomness of the movements from day to day, the forecasting value of daily fluctuations is limited at best. At worst, too much emphasis on daily fluctuation will lead to forecasting errors and possibly losses. Getting too caught up in the movement of one or two days can lead to hasty decisions that are based on emotion.