ANALYSIS-Dow Theory still valid despite calls for overhaul

Still, Dow Theory has its limits. One is its underlying belief that the Dow contains major market movers, a notion that has been hotly debated for decades. The continued Dow membership of battered stocks including Citigroup (C.N) and General Motors GM.N have reignited the debate.

"Institutional investors just don't see it as a reflection of the market," said Fred Dickson, market strategist for D.A. Davidson & Co.

Dickson said investors "don't pay any attention to the Dow Theory because of the massive changes in the Dow over time and the Dow includes stocks that are no longer representative of the leaders."

On the other side of the debate are those who say the Dow is still a good barometer of troubles in the economy.

The Dow "for all its faults, is a sentiment indicator and you can see that things just feel bad," said Warren West, principal at Greentree Brokerage Services.

Russell himself has at times been one of the Dow's doubters. In an interview last week he said that without adequate representation of the financials, the Dow may take longer to confirm a bear market signal.

But he changed his mind days later when the Dow plunged to a 12-year low, followed closely by the S&P 500's tumble below its 12-year closing low.

"The reconfirmation came quicker than I thought it would," Russell said. "As far as the Dow Theory goes, the relationship still holds." (Editing by Leslie Adler)