The stock market discounts all news
August 7th, 2008 | 
Stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow Theory agrees with one of the premises of the efficient market hypothesis.
The idea that the market discounts everything is not new to technical traders, as this is a major premise of many of the tools used in this field of study. Accordingly, in technical analysis one need only look at price movements, and not at other factors such as the balance sheet
Like mainstream technical analysis, Dow theory is mainly focused on price. However, the two differ in that Dow theory is concerned with the movements of the broad markets, rather than specific securities.
For example, a follower of Dow theory will look at the price movement of the major market indexes. Once they have an idea of the prevailing trend in the market, they will make an investment decision. If the prevailing trend is upward, it follows that an investor would buy individual stocks trading at a fair valuation. This is where a broad understanding of the fundamental factors that affect a company can be helpful.
It’s important to note that while Dow theory itself is focused on price movements and index trends, implementation can also incorporate elements of fundamental analysis, including value- and fundamental-oriented strategies.
Note:
Menurut Dow harga yang terjadi saat ini sebenernya sudah merefleksikan kejadian di market saat ini juga. Yang paling penting menurut dow adalah bukan apa yang bisa menyebabkan harga bergerak saat ini tapi reaksi apa yang mungkin terjadi terhadap pergerakan harga saat iniSemua informasi tentang pergerakan harga sudah tercermin dalam harga/chart itu sendiri.
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