Thanks Dave for the clarification on the "short" QID position. Yes, I am short the Qs via the QID, and I agree that there is no more room left for the VIX to move down. If we don't see an increase in volatility tomorrow, the markets may be ready to break out to the next downsloping channel line as shown in the above chart.
I have read some of WD Gann's books and although I don't agree with all of his methods, some of his ideas deserve merit. His idea that markets tend to move along fixed lines until they jump to the next level or angle seems to be a valid observation. I find it difficult to implement however. But look at the lines drawn above. Is it just total coincidence that the line through the two lower lows from the first wave down in 2007 is exactly parallel to the line through the three lower lows in October and November of this year, as well as the three lower highs from the same period which also hit the June high? I can't explain it, but I think these lines are the dominant force in the downtrend until it reverses. One possible outcome that I see happening is a breakout above the current trendline after which the market slides down the upper side of that line to new lows, and then finally breaks out above the highest line to signal an end to primary wave 1 down.