The DOW, DOW theory, and Socionomics

 10/2/2025

Note long time readers have noted I often comment that typepad was not posting my charts. That has not been a problem with blogspot. I am surprised at how intuitive blogspot is for the user. 😁😁

Charles Dow created his Dow Theory in 1896.  

Learn about the Dow Industrial Average here.

Interestingly Charles created the Transportation Average before the Industrials. Remember at the time railroads were still the one way to get around, no cars, no  airplanes.  Just this week I had to stop at a RR crossing for open cars carrying gravel. To this day RR are the only economical way to move heavy items like gravel. 

I make reference to and you can read a good summary Elliott Wave here.  

Here is a comment from the Wiki article.

Some analysts consider the Elliott wave principle as too dated to be applicable in today's markets, as explained by financial market analyst Glenn Neely, author of Mastering Elliott Wave:^[10]

Elliott wave was an incredible discovery for its time. But, as technologies, governments, economies, and social systems have changed, the behavior of people has also. These changes have affected the wave patterns R. N. Elliott discovered. Consequently, strict application of orthodox Elliott wave concepts to current day markets skews forecasting accuracy. Markets have evolved, but Elliott has not.

I think not!  Humans still sell at the bottom and pile wildly in at the top. I have taught college accounting courses for some 25 years actually dating back to UTPB in the early 1990s. I have taught at four different universities. I see no difference in student behavior than I did in 1966-1972 at UT Austin in my BBA and MBA studies.  That covers 60 years a far time span for an experiment. 

Times change People don't.  

What has been will be again,
    what has been done will be done again;
    there is nothing new under the sun.

Read full chapter

Ecclesiastes 1:9 in all English translations

 

Note this book is from the Old not the New Testament. 

Here is the big picture.  I was in a meeetng this week. The speaker asked what is driving the price of gold.  His take was the deamnd for NVDA chips which contain gold. Uh no, in fact siocial mood has turned positive on gold, and now silver. This si why  people buy or sell things. 

 

Learn Socio basics here 

 

In the early 1990s gold bottomed at 180-190, social mood towards gold was negative.  Mood toward anything AI is wildly positive. And so NVDA trades at a 57x multiple. Mood was positive in fall 1929 when the Dow hit377-390. It was negative in the summer iof 1932 when it dropped to 43.  R N Elliott created his theory of five waves in the  1930s. Those waves explain human behavior especially relating to the stock market.  The stock market is a reflection of social mood as millions of investors make millions of decisions to buy or sell. Hence we can see mood on display. 

 

It is easy to see how mood can affect interest in movies or music. Happy seek happy songs and movies Unhappy seek darker themses such as Dracula in the  1930s, the Exorcist in 1972 or Weapons and the Long Walk today.