http://www.marketora...rticle5093.html
Here are a few quotes from the great Dow theorists of the past on the subject of non-confirmation.
William Peter Hamilton – “The movement of both the railroad (now the Transports) and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading.”
William Peter Hamilton – “Dow's theory stipulates for a confirmation of one average by the other. This constantly occurs at the inception of a primary movement, but is anything but consistently present when the market turns for a secondary swing.”
William Peter Hamilton – “When one breaks through an old low level without the other, or when one establishes a new high for the short swing, unsupported, the inference is almost invariably deceptive.”
William Peter Hamilton – “Indeed it may be said that a new high or a new low by one of the averages unconfirmed by the other has been invariably deceptive. New high or low points for both have preceded every major movement since the averages were established.”
William Peter Hamilton – “The two averages may vary in strength, but they will not vary materially in direction especially in a major movement. Throughout all the years in which both averages have been kept, this rule has proved entirely dependable. It is not only true in the major swings of the market, but it is approximately true of the secondary actions and rallies. It would not be true of the daily fluctuations, and it might be utterly misleading so far as individual stocks are concerned.”
Robert Rhea – “The most useful part of the Dow theory, and the part that must never be forgotten for even a day, is the fact that no price movement is worthy of consideration unless the movement is confirmed by both averages.”
Robert Rhea – “The Dow theory deals exclusively with the movement of the railroad and industrial stock averages, and any other method would not be Dow's theory as expounded by Hamilton.”
Robert Rhea – “A wise man lets the market alone when the averages disagree.”
Robert Rhea – “When the averages disagree they are shouting ‘be careful'.”
