by Alasdair MacLeod
This article examines the relevance of technical analysis to today’s financial markets. Its genesis springs from two branches, Dow theory and the Elliott wave principal.
Originally, Dow theory sprang from an attempt to discern the state of the economy through the construction of representative stock indices for railroads and industrials. Elliott came into existence in the 1930s, but only really became widely followed in the late 1980s.
Both Dow and Elliott were intended to help investors make profits by reading equity stock indices, though their use has spread to other financial assets. The validity of this wider use is questioned.