In early September I provided an Elliott Wave Principle-based update on the NASDAQ 100. Even a month before that, I was looking for the index to ideally reach $16K. Three weeks ago, it was at $15.6K and topped at $15.7K three days after I wrote my last update. It had, thus, reached inside my ideal (green) minor wave-3 Fibonacci-based target zone ($15611-16064). See Figure 1 below.
Earlier this month I had concluded:
- …target zone is reached, and some caution is advised for shorter-term traders because after wave three comes wave-4 and wave-5.
- The negatively diverging technical indicators (red dotted arrows) suggest this 5-7% pullback as well.
- I anticipate the index to top out in the target zone soon, put in a multi-week correction back down to the ideal wave-4 target zone $14430-14880 before rallying for wave-5 to ideally $16340-16760.
- That last rally then completes an even more significant 3rd wave (black, major wave-3), and a multi-month major 4th wave should then rattle the markets, and a revisit of $14750+/-250 should then be in the cards.
Figure 1: NDX100 daily candlestick chart with EWP count and technical indicators.
Fast forward, and the NDX indeed topped out in the ideal target zone and has already reached the upper end of the (green) minor wave-4 target zone. Thus, most of the damage has most likely already been done. An ideal wave-4 = wave-2 relationship targets NDX 14,615 (green dotted down arrow), perfectly inside the perfect 4th wave target zone. However, all of the technical indicators are pointing down and/or are on a sell. Thus, for now, downside, even after a multi-day bounce, must be preferred.
Regardless, the EWP combined with objective technical analysis was a powerful tool to help anticipate the next most likely move. At today’s low, the index was down 5.7% from its recent all-time high, and my expected 5-7% correction came to fruition as well.
Now that the 4th wave target zone is reached, it could be time to hit the buy button as a low risk/high reward long setup is now presenting itself. I suggest readers do the same, and use these target zones wisely. Besides, the market does not move in mysterious ways but adheres nicely to time-tested, proven, universal and mathematically price patterns. Once you know and have unravelled those, trading and investing become much more manageable.