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NASDAQ 100: Despite Recent Drop, 18000 Should Still Be Next

By Dr. Arnout ter Schure Stock MarketsJan 12, 2022 02:53PM ET
www.investing.com/analysis/nasdaq-100-despite-recent-drop-18000-should-still-be-next-200614527
NASDAQ 100: Despite Recent Drop, 18000 Should Still Be Next
By Dr. Arnout ter Schure   |  Jan 12, 2022 02:53PM ET
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A month ago, see here, using the Elliott Wave Principle (EWP), I was looking for the NASDAQ 100 to ideally reach as low as $15135. Then on December 20th, the index dropped to as low as $15509, which was only 2.5% above the ideal target zone, and staged a strong rally into late December, only to give up all those gains and drop to as low as $15165 two days ago.

The index dropped below the December 20th low; thus, I must adjust my POV. In my last update, see here, I preferred the option for the (red) intermediate wave-iv low to be complete at the December 20th low, knowing that "since wave-2 cannot move below the start of wave-1, which is the $15509 low, it means the NDX must stay above this week's low." Remember, all we can do is "anticipate, monitor, and adjust if necessary." So what does this additional drop into Monday's low mean?

Figure 1 NDX100 daily candlestick chart with detailed EWP count and technical indicators.

NDX Daily Chart
NDX Daily Chart

It simply means the index decided to subdivide lower, with the late-December high a smaller (grey, minute) c-wave of a larger (green, minor) b-wave. Thus Monday's low was most likely the completion of (green) minor-c of (red) intermediate-iv for as long as it holds. Namely, subdivisions can always happen like the one we just experienced. We cannot predict them, but we must always be aware that they can happen. Hence, one has to incorporate if/then scenarios using invalidation price levels.

Regardless, the index now has a much more complete and better look to the wave-iv correction: a classic expanded flat. Besides, with the index so far bottoming only 30p ($15165 vs. $15135 = 0.20% !) from the upper end of the ideal wave-iv target zone as forecasted a month ago, it has come as close as it almost perfectly can.

Now the devil is in the detail, and the index can still try for one last stab lower, but if Monday's low holds, I will be looking for five smaller waves up off that low, which would then be minor wave-1 of intermediate wave-v, as the latter will, of course, comprise five minor waves: 1, 2, 3, 4, 5. These five smaller waves have not yet been completed. If they do, then a multi-day pullback should ensue; wave-2. After that, pullback waves 3, 4, and 5 will enfold, ideally to $17400-18060, to complete wave-v of (black) major-3. Since we know with certainty after a 3rd wave follows the 4th wave, by then, it will be time to look for another 15+/-5% correction: major-4.

Bottom Line

The intermediate wave-iv correction was not complete at the December 20th low. Instead, the index took a detour as it subdivided further into an additional b- and c wave to allow the index to bottom out only 0.2% away from the ideal target zone. These extra waves permitted what is called in EWP terms for a (rather perfect) flat correction. Thus, albeit one final stab lower can not yet be excluded, if Monday's price low holds, it is again time to look for an impulse move higher to $17400-18060.

NASDAQ 100: Despite Recent Drop, 18000 Should Still Be Next
 

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NASDAQ 100: Despite Recent Drop, 18000 Should Still Be Next

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Comments (11)
Mitch Gordon
Mitch Gordon Jan 19, 2022 1:39AM ET
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So I understand from this that from yesterdays stab lower  we are to expect an impulsive rally up to at least 17400
Steven Kilgore
Steven Kilgore Jan 18, 2022 8:20PM ET
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Since it appears that we went to the next leg down what do you see happening next?
Sari xx
Sari xx Jan 14, 2022 11:21AM ET
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Monday's low held Dr. Drinks on me next week *****
MOHAMMAD SAEDI
MOHAMMAD SAEDI Jan 12, 2022 11:06PM ET
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I mentiond that the wave "c" of "C" had not completed yet in your last article about NASDAQ100. The index will be up in a less steep new channel.
Jeff Page
Jeff Page Jan 12, 2022 10:03PM ET
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X financials it's difficult for me to get there on the Q's. RUT should be performing and is the area I'm watching. Are the small caps going to lift off or sleep through summer?
Pauline Nguyen
Pauline Nguyen Jan 12, 2022 9:54PM ET
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Would not age well if this takes at least 5% to 10%.
Sam Gates
Sam Gates Jan 12, 2022 8:32PM ET
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Dr. You must not be serious i see a 10-20% correction . The market has topped out with inflation near its peak. We will see the fed tapper more and remove liquidity from the market causing deflation and opposite chain reaction. Only way we reach new all time high is another lockdown with a correction and more money printing. Similar to the previous pandemic run up. Bitcoin and everthing but oil is topped out.
Shane Zhang
Shane Zhang Jan 12, 2022 8:32PM ET
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maybe covid recent surge can change fed mind as we all know fed they flip flop about their desicion a lot
Ayumastura PinkLady
Ayumastura PinkLady Jan 12, 2022 4:19PM ET
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if compare with dotcom bubble, yes i think nasdaq will rally not only to 18k but 40k before burst.. somehow the weekly chart today similar with dotcom bubble. U guys can see if today = 18oct99 weekly chart. See macd too. Very similar!
Shane Zhang
Shane Zhang Jan 12, 2022 4:19PM ET
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agree the current situation is different from 1999.  We are in a brand new order now.  I saw lot of analysis always making compare with the past, this is a receipt fail.
Mean Aversion
Mean Aversion Jan 12, 2022 4:04PM ET
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Article summary: I will cherry pick an old prediction I made that finally ended up coming true even though not when I expected it to. Told you! Also, if the market doesn't end up going lower, it will probably go higher, though I have no idea how likely either outcome is. Great insight!
Dr. Arnout ter Schure
Dr. Arnout ter Schure Jan 12, 2022 4:04PM ET
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LOL, that was not cherry-picked, but the first time I forecasted (forecasting is not predicting btw!) 15135 would be reached. Hence, it is appropriate to reference that article to establish the proper baseline to see if that forecast came to fruition or not. And it did because somehow I still found on December 14 the NDX would hit 15135...And voila here we are 15165... Nobody knows the exact path a market will take to get there, but one can forecast pretty darn accurately where it will top and bottom using the right analytical tools. When and how is a whole other question. Now, let's revisit this comment by MA when the NDX tops at 17400-18000+
Mean Aversion
Mean Aversion Jan 12, 2022 4:04PM ET
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Dr. Arnout ter Schure  I don't consider a 3.45% range (600/17400) "pretty darn accurate" unless we're talking about a multi-year top. Anyone could predict that there will be a pullback in that range using error bars that wide. And most likely, if it doesn't pull back in that range you'll expand your error bars even further and say "it was within just a few %" of your already wide range. Your forecasts are useless unless you can tighten them up.
Peter ONeill
Peter ONeill Jan 12, 2022 3:22PM ET
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PE Ratios are 35% above long-term averages and profits in 2022 are projected to come in at 7% - 9% above 2021 levels - which implies that stocks have gotten ahead of their true value due to cheap cash and are about 26% overvalued. YET you seem to think the rally will continue indefinitely and the market will rise by another 20%???? So 45% overvalued???? They must love you in bubble world ;). I for one will not invest more until there is about a 25%+ long-overdue correction. Might take another 12 - 18 months to see that as so much cheap fed cash/debt flooded the market (at which stage might imply 35%+ fall). But zero chance am I investing in this bubble before it bursts.
MK MK
MK MK Jan 12, 2022 3:17PM ET
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I guess someone pays to others read this article ))What can drive indexes so high? Everyone wants to sell holdings now
Peter ONeill
Peter ONeill Jan 12, 2022 3:17PM ET
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Anything can happen in a bubble world. Indexes might go up higher but just means will drop harder and faster once it does all burst. Would have burst several times already if Fed hadn't flooded the market with $7+ Trillion of cash / debt which all has to find a home (then they ignore that and say inflation is ONLY due to bottlenecks - nothing the fed has done hahaha). Guess no one told the fed economists about QE 101 .... how you pump trillions out in stimulus - it will result in bubbles and inflation...
 
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