Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-11
CHARTS INDICATE
MARKET ADVANCE
r
Dow System of Averages Has
Been Tested Over go
Year Span.
BY CHARLES +. sPEARE.

Special Dispatch to The star.
NEW YORK, February 11.-An in
cident in the recovery of the stock
market this month, to which improve
ment in business sentiment and more
industrial activity are closely identihed,
is the advance in both the industrial
and railroad stock price averages above
that reached early in December.
To readers of market graphs and
charts this is a most significant de-
velopment. 1t augurs better times both
for securities and for industry, which
nave come to be recognized as inter-
one f1eld closely sympathizinR with
those in the other.
Dow Theory Of Averages.
Thirty years or more ago the So
called Dow theory of averages" was
established. It has run quite true TO
us original form as a barometer of
markets ever since. On various occa-
slons 1t has anticipated severe market
reactions and equally pronounced mar
ket advances. AT present it suggests
that the end of the bear movement
IN stocks ended some weeks ago and
tnat the outlook for an indefinite period
Is far more favorable conditions.
In discussing the Dow theory OF
averages, the Wall Street Journal said
editortally: IF the method of reading
this barometer, which has proved a
useful guide for more than so years,
is still reliable, it is reasonable to
expect that the tidal movement of the
market will be upward for the indefi-
mite future. This conclusion does not
include any forecasts to the immediate
course OF the market. Frequently, but
oy no means always, when both av-
erageS go through previous highs, the
surge carries considerably further be-
fore the market experiences q serious
secondary reaction"
Dealing with the averages chrono-
logically it will be found that when in
ouStrlal stocks reached their summit on
september last they represented the
high record for all time of 381.17. On
November Is they were down to 198. so,
or Shrinkage of nearly so per cent.
Both industrial and rail averages
reached their crest on the same day, the
latter at 1871, followed by a break to
12S.O7 in the November crisis. Then
came slow and later a rapid recovery
which eliminated for the industrials on
december Y. when the averages of this
group touched 263.46, or gain OF
about SIS points from the panic figure
Two days later the rail averages went
TO approximately 152, or "a points
higher than in November. :
It was at this time that a great deal
OF stock that had been salvaged in the
panic was redistributed. The amount
OF 1t increased the floating supply to
such an extent that securities became
heavy again and continued so for over
a month. They were affected not only
by technical market conditions, but by
the appearance Of trade reaction that
had been caused by the Wall Street
slump and which suggested poor reports
OF earnings and did result in quite
few dividend reductions. The situation
was also disturbed by heavy selling for
tax purposes. In the week before
Christmas the industrials were about
80 points average lower than on De-
cember and rails points lower. Not
much change in this situation occurred
until the middle of January.