Sorry to be back to the dour side of investing life.

It's the DOW, of course, that is the cause of the dour story, not yours truly. But it is important to look at our adversary straight between the eyes and that is exactly what I want to do in my column this week. There is little point in shutting our eyes and hoping all this will go away. It will eventually but we need to still embrace the prerequisite low first so that we can take advantage of great buying when we get there.

Most daily charts I look at suggest maybe a small rally but a deeper low in the coming weeks:

Chart 1

click here to enlarge

A low of about 6800 - not too scary in the overall scheme of things - but a weekly chart is less palatable:

Chart 2

click here to enlarge

This suggests - understandably - a stronger relief rally - but the price for any temporary reprieve is an even deeper low to follow - to 6000.

ProfitSource users will know that the shading we see for Wave 3 says Wave 3 is not yet complete. My experience with such situations is that when a strong trend is in play - as we are now experiencing in this big bear slide - that Wave 3 can actually slide to Wave 5 levels. That is without anything resembling a relief rally actually taking place.

You may not like the idea of heading pretty much to 6000 on the DOW as that is most likely to have dour consequences for all of us all over the world. But in a way if we have a choice would it not be better to 'bring it on' now? That is, let's get this recession out of the way, let's get back to the economic bliss we took so much for granted, and let's get real underlying value back into equities. If only we had a choice.

Enjoy the ride.

Tom Scollon
Chief Analyst
Trading Tutors Team