you’ve got a point but the DOW just ain’t what it used to be, kind of like the lower Manhattan financial district, not much left along the old ‘Wall St.’
Charles Dow never intended the Dow Jones Industrial Average to be a finely tuned barometer of the overall stock market. It was, and still, is reflective of the most “important” publicly traded companies, and is a shorthand indicator of how the broad market is doing.
It still serves that purpose admirably, IMO. It is STILL the most widely quoted index that answers the question of “how’s the market doing.”
See this note at Investopedia.
http://www.investopedia.com/articles/stocks/08/dow-history.asp
“Considering the breadth of today’s economy, one might mistakenly believe that an index consisting of a mere 30 stocks could hardly be of any value. That is simply untrue. In addition to representing 30 of the most highly capitalized and influential companies in the U.S. economy, the Dow is also the financial media’s most referenced U.S. market index and remains a good indicator of general market trends.
If one compares a pricing chart of the Dow with a chart of the Wilshire 5000, the most inclusive of all U.S. indexes, it is evident that the two have followed astonishingly similar paths. The Dow has historically begun to decline for extended periods before the more speculative Nasdaq index, a pattern which occurred in the stock market downturns that began in April of 1998, January of 2000, December of 2001, January of 2004, December of 2004, and October of 2007.”
Also, this history.
http://www.djaverages.com/?go=industrial-overview
“When Charles H. Dow first unveiled his industrial stock average on May 26, 1896, the stock market was not highly regarded.
Today, stocks are widely accepted as investment vehicles, even by conservative investors. The circle of investors has widened far beyond the Wall Street cliques of the past to millions of everyday working men and women. These people are turning to stocks to help them amass capital for their children’s college tuition bills and their own retirements. Information to guide them in their investment decisions is now abundantly available.
The Dow Jones Industrial Average played a role in bringing about this tremendous change. One hundred years ago, even people on Wall Street found it difficult to discern from day to day whether the wider stock market was rising, falling or treading water. Charles Dow devised his stock average to make sense out of this confusion. He began in 1884 with 11 stocks, most of them railroads, which were the first great national corporations. He compared his average to placing sticks in the beach sand to determine, wave after successive wave, whether the tide was coming in or going out. If the average’s peaks and troughs rose progressively higher then a bull market prevailed; if the peaks and troughs dropped lower and lower, a bear market was on.
It seems simplistic nowadays with the array of market indicators in the public eye, but late in the nineteenth century it was like turning on a powerful new beacon that cut through the fog. The average provided a convenient benchmark for comparing individual stocks to the course of the market, for comparing the market with other indicators of economic conditions, or simply for conversation at the corner of Wall and Broad Streets about the market’s direction.
The mechanics of the first stock average were dictated by the necessity of computing it with paper and pencil: Add up the prices and divide by the number of stocks. This application of grade-school arithmetic, while creative, is hardly useful more than a century later. But the very idea of using an index to differentiate the stock market’s long-term trends from short-term fluctuations deserves a salute. Without the means for the ordinary investor to follow the broad market, today’s age of financial democracy (in which millions of employees are actively directing the investment of their own future pension money and as a result are substantial corporate shareholders) would be unimaginable.”