There's a school of investors that believes everything you need to know about a stock is "in the chart." That is, all the hopes, dreams, pessimism, expectations of investors . . everything you can possibly want to know about a stock is already reflected in the stock's price movements, and those price movements are shown in the stock's chart.

This school of investment theory, called "technical analysis," also applies to looking at charts of the market.

An important part of technical analysis is putting familiar chart patterns into some context. One of these familiar chart patterns occurs when stocks "fill the gap."

What does it mean to "fill the gap?" Let's go back to trading when the market reopened following the September 11 terrorist attacks. If you look at a chart of the Dow Jones Industrial Average, what you'll see is a gap in the chart after the market resumed trading. The gap was created because stocks opened up much lower when trading resumed from where they closed the previous trading day.

The Dow subsequently declined further, bottomed, and rallied. On the ensuing rally, the Dow "filled the gap" by rallying up to the pre-gap price.

Now that the Dow has "filled the gap" -- that is, the Dow has now rallied back to pre-September 11 levels -- what does technical analysis say? Actually, with the gap being filled, a technician would likely expect the market to resume its downward course.

How low could the Dow go? Actually, here technical analysis provides further assistance. You would like to see the Dow retest - but hold - its previous low of 8235. Should the Dow hold that level, technicians would expect another rally to unfold.

Now I wouldn't necessarily call myself a technician, I do like to look at charts of stocks and the markets. I believe getting a sense for how a stock or a market index has traded can help you put fundamental factors (earnings, revenue, finances, etc.) in a better perspective. And it seems that certain chart formations - such as filling the gap - do tend to work out more often than not.

Thus, I would not be surprised to see the Dow Industrials drift lower in the near term and perhaps retest the 8300 level. However, should that level hold, it could be setting up the best buying opportunity in the last two years.