Once again, the Dow has registered a lame, listless rally and then moved back below 8,000.

For those investors who may not follow indices closely, the 8,000 level has psychological but not technical support. The latter measures such things as the number of investors who are buying / selling, whether investors are committing new money to the market etc.

Right now a battle is taking place between bulls and bears at the institutional investor level: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls say that the worst news is behind us, and that government stimulus, fiscal and monetary, will both stabilize the financial system and get the U.S. economy moving again.

The Dow Tuesday closed below 8,000 at 7,949. If the bears can keep the Dow below 8,000, then push it through 7,800, then 7,600, it will not be a pleasant time for investors.

Some institutions may continue to hand-sit until mid-February, preferring to await the Obama Administration's announcement of the exact size of the fiscal stimulus package, now believed to be approaching $725-850 billion.

Once again, Dow 8,000 has come back into focus.

For those investors who may not follow indices closely, the 8,000 level has a psychological but not technical support, the latter of which measures such things as the number of investors who are buying / selling, whether investors are committing more money to the market etc.

Even so, right now, a battle is taking place between the bulls and the bears: the bears argue the worst economic news stemming from the financial crisis is yet to come; the bulls argue that the worst news is behind us, and that government stimulus, fiscal and monetary, will get the U.S. economy moving again.

The Dow Jones Industrial Average Wednesday closed below 8,000 at 7,997. If the bears can keep the Dow below 8,000 and then push it through 7,800, then 7,600, it will not be a pleasant time for investors.

Let's do a condensed, cross-methodology analysis to see if we can arrive at an informed investment decision / conclusion regarding where the Dow is headed, near-term.

Let's pull the lens back slightly to see the financial and economic picture -- evaluate the investing horizon, if you will.

The Dow Jones Industrial Average Wednesday registered yet another difficult day, down 514 points to 8,519.21.

From a technical analysis standpoint the view is not pleasant. The Dow is well below its 50-day and 200-day moving averages, there's not enough buy-side pressure to propel the Dow higher, but the Dow is still not oversold, with a relative strength index (rsi) of 36. This suggests the Dow will move lower, near-term.

The above, combined with likely weak earnings reports for the most recent quarter, are the main reasons yours truly has taken pains to underscore that if the Dow can hold 8,000 until 'normal' credit flows resume, that will be a moral victory.

I'll emphasize again. There's technical support in the 7,300-7,600 range, but not below that, which is why the psychological 8,000 level is important: it's not as strong a barrier as technical support, but it's 'the barrier before the barrier' -- and the goal is to avoid testing the last support, if possible. (The Dow also has technical support at 8,500 and 8,200: we'll see how they fare on Thursday, and moving forward.)

Is it time to rein-in expectations regarding the Dow?

Indeed it is, if technical analysis and historical p/e ratios mean anything.

Those with visions of a Dow of 11,000 dancing inside their heads need to take a step back, for context and perspective, on the likelihood of a Dow push to that level in the near future.

The U.S. economy is in recession, it's shedding jobs, downward corporate earnings revisions are likely, and the world's major economic regions are attempting to re-liquefy credit markets and prevent a global financial crisis from further damaging economies, worldwide.

The above, as CNN Talk Show Host Larry King would say, 'ain't exactly signs of prosperity.'

And the Dow has responded: down more than 30% since hitting its all-time high above 14,000 a year ago.

Keep your eye on 8,500 / 8,200 / 8,000

Earlier in this space yours truly noted that the Dow had technical support at the 8,500 to 8,200 levels, and of course psychological support at 8,000.

One of the BloggingStocks editors recently instant messaged me and said, "You know, I think technical analysis is bull." I've heard this opinion very frequently, and I've even held this opinion in the past. But from watching stocks for several years I've seen certain price moves that seem to occur again and again. Sure enough, these movements are some of the most fundamental elements of technical analysis; for example, support, resistance, uptrend, etc. I've seen many people who don't know any technical analysis but reference a stock's breakout on its "graph" -- just from watching stocks trade, they have realized this is often a sign of future profits to come.

As I began studying technical analysis more frequently, I learned more about the skill -- moving averages, indicators, oscillators, and so on. Many of these tools, in my opinion, do in fact have predictive value in the stock market. More importantly, these tools allow traders to more effectively and systematically (therefore, less emotionally) manage their money.

All this being said, I think the editor was right in one regard -- I have a lot of trouble believing in patterns (e.g., "Head and Shoulders") because I think that many of these are way too objective when it comes to trading. I also find that they are harder to explain than many other tenets of technical analysis, such as support and resistance.

I've been on all sides of the technical analysis argument -- extraordinarily against, emotionally for, and everything in between. As it stands now, I feel like it's just another tool in the toolbox for a trader and there's no reason not to consider it.