Watching paint dry…

Fairly uneventful day across the board.  Stocks rallied in the morning, dipped down around lunch, and decided to rally into the close.  Not much gained or lost today.  Yes, today was better for the bearish case than a 200-point up-day (which I would gladly take at this point), but not as nice as the blood in the streets we have been calling for.  But as I said, we cannot fall straight down.  Nor can we manage a continued trend at this point.  If we fall tomorrow, we will be closely watching for a slightly stronger retracement, targeting 11550-11600 in the $INDU, which would give the bulls the confidence we need to drop.  Conversely, closing beneath 11100 with some strength would be a clear confirmation.

But let me step back here.  Mole spoke last night about the minute and minuette scale moves that are going on right now, so I will talk about the larger degree moves that are unfolding.  As long as the 8/11 highs in the $INDU (11867.11) and $SPX (1313.15), and the 8/15 high of 2473.20 in the $COMPQ are not breached, it will be down-hill from here.  We have completed a very large scale (1) and (2), as well as an intermediate 1 and 2, which has the stages set for intermediate wave 3 of the larger wave (3).  Yes, this is where Elliott Wave Theory can become complex due to it’s fractal nature.  The entire wave (1) down in the $COMPQ took 138 days, while its component waves 1 and 2 took 27 and 15 days respectively.  Wave (3)’s component waves 1 and 2 have taken 40 and 30 days so far.  A rough estimation would give the larger wave (3) an expected time range of 207-223 days.  That would have us nearing the a potential bottom of around 1400 by this December to January of 09.  This $COMPQ chart is constructed using the slopes of past moves so I don’t get that “but that is straight down.”

A number of indicators still support the case that this decline is still in its developing stages.  RSI break-outs have occurred across all indexes.  The $VIX was down sharply today which means, despite a 100 point (high to low) drop in 4 days in the $COMPQ, people are not scared.  In fact, this is one of the tell-tale signs I have been waiting for.  What we are really waiting for here is a nice move lower with some volume.

And now I will step back again and give you another view.  This is a LONG term view of $SPX (actually, two) that will help you understand the scope, and can get my targets on the chart.  Again, I have only preliminary targets on the charts (now that they will fit).

Here’s the other (this one covers only 30 years)…

So, whether the $COMPQ decides to fill it’s newly created gap @ 2417 or not, the end result is the same…starkly lower in a rapid decline.

So…how long does it take paint to dry?  If this is wave 3 working its magic here, the tape should start peeling away very soon.

Skål!