Chart constructed using Advanced GET End-of-Day

Boy -- We have certainly come a long way in a relatively short period of time on the ratio chart above where we divide the Nasdaq Composite by the Dow Jones Industrial Average. The the "new economy" Nasdaq Composite has now almost halved in value vis a vis the "old economy" Dow since the early March high. Who says value investing is dead in this era of tech hype and momentum-oriented day traders? Yes, gravity works and there is a God providing the world with a good dose of sanity.

And yet, if Leonardo Fibonacci were alive, he'd be looking for just a bit more on the downside of this ratio to satisfy the rhythm of the retracement lines drawn above, and then a reversal back up. If R. N. Elliott were alive, he'd be reminding us that extended 5th waves (which this parabolic chart most certainly was), quite often get retraced twice: once down, and then in yet one more failed rally back up. When gold dropped in 1980, it went from $800 to $450 in a pretty fierce drop not dissimilar to current charts of ATT, Lucent, and Apple. But then few may remember that gold did make one last failed run at $725 over a number of months before the true bear set in.

All eyes should be on the lookout for a Nasdaq low of some significance likely next week. On the chart above we've postulated it could come somewhere toward 2450 in an idealized world, which if our ratio chart holds up in Fibonacci fashion, would put the Dow around 10,305 at the same time.

After that, it may be time to cherry pick some fallen tech angels and see how far back up we can go.

Meanwhile, the Dow's reticence to fall to date has been frustrating for bears. A "broadening formation" that is a true tops really should not have dawdled this long. Could the Dow now fall when the Nasdaq goes back up? Or is it now more likely that this whole period of sideways Dow chop (while the Nasdaq's been melting), will end up being a huge 4th wave, before one last hurrah up? We'll take a closer look at that issue when we get there, but the case for a 4th wave continuation pattern before a final spike to the upside may slowly be improving. We continue to find it hard to believe that with really one economy out there, the Nasdaq and Dow indices can move in such disparate absolute directions for much longer.

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