It’s important to note that while the market tends to move in a general trend, it doesn’t do so in a straight line. The market will rally up to a high (peak) and then sell off to a low (bottom), but will generally move in one direction.
An upward trend is broken up into several rallies, where each rally has a high and a low. For a market to be considered in an uptrend, each peak in the rally must reach a higher level than the previous rally’s peak, and each low in the rally must be higher than the previous rally’s low. Similarly, a downward trend is broken up into several sell-offs, in which each sell-off also has a high and a low. To be considered a downtrend in Dow terms, each new low in the sell-off must be lower than the previous sell-off’s low and the peak in the sell-off must be lower then the peak in the previous sell-off.