ALMOST OVER (for the "A" wave down)

There was panic overnight in Asia and our markets have tested 7980 so far. Will the Dow punch under its lows of earlier in the month, or rally 2000-4000 points from here? That is the big question, but here is the risk/reward on both.

Punch lower: As I've been giving for a year now, the 7000 area +/- 800 in the Dow is the target for this initial wave "A" down. Earlier in the month, it touched 7800, or the high end of the target given when the Dow was 14,000 in October 2007. Today's lows retested it and have bounced, but there is nothing keeping it from getting deeper into the range. So let's say it tests 7000 in the next day or two. That is 10% more risk from here, after already falling 40% from the top. 10% is livable, so buying could be done from 8000-6500 Dow.

Move higher: If wave "A" is done, I've been talking about the wave "B" bounce into 11,000-12,000 into early 2009. If that happens, that would be a 35% - 45% move higher. We'd all like to join in on that, expecially since it'll eventually fail and roll over to make lows under those of the current lows. So, grabbing some while we can, and selling into it is a good plan.

Therefore, if we can risk 10% - 15% from here, we could participate in a 35% - 45% rally in the next 6 months. We call that a 3:1 winning proposition.

Good Luck.

For what it's worth,

Ken