The rapid decline of the Dow Industrials Index and other major Indexes over the past week or so has unnerved many investors.  In nominal terms, the Dow has fallen about 40% since the major high of October 2007.  The natural instinct now is to “bail out” before more damage is done.  However, Japanese Candlestick formations in the Index price patterns tell us that a major low is very near, and that now would be exactly the wrong time to sell.

We called for defensive postures soon after the high of a year ago.  Those who have followed our suggestions and gone short one way or another have done well over the past year, whether in defense of existing portfolio positions or in search of profit for profit’s sake.  However, prices do move in waves, and we are now at or very close to the bottom of a major wave.  The next move will be Up, as a correction of the major underlying trend.

Therefore, now might be a good time to acquire a Call option or two on one of the major Indexes.  At the crest of the upmove, there is likely to be another great shorting opportunity.