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NASDAQ 100 Is Currently In Highly Uncertain Territory

By Dr. Arnout ter Schure Stock MarketsMar 25, 2021 04:19PM ET
www.investing.com/analysis/nasdaq-100-is-currently-in-highly-uncertain-territory-200569568
NASDAQ 100 Is Currently In Highly Uncertain Territory
By Dr. Arnout ter Schure   |  Mar 25, 2021 04:19PM ET
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In my article from two weeks ago, I showed the NASDAQ 100 bulls had one more chance if the early-March NDX 12208 low held. The rally since then to13297 by mid-March was constructive, but the subsequent decline we are now dealing with leaves much to be desired and has opened up Pandora (OTC:PANDY)'s box: the NDX and its related ETF, the Invesco QQQ Trust (NASDAQ:QQQ), has a YTD return of -1.5%. Not the best of first quarter.

In this update, I will share with you the four Elliott Wave Principle (EWP) options I am tracking. One is highly bearish, others are short-term bearish, but then intermediate-term bullish. Ultimately, all are still long-term (months out) bearish. Allow me to explain, as this will be an exercise in understanding the probabilities of possibilities. Namely, the financial markets are probabilistic, and the EWP helps in understanding these options. It can tell when critical price levels are broken to the upside or downside, which of these options are invalidated. One by one, there will then only be "one-man-standing," so to say.

Figure 1 A, B. NDX 100 daily candlestick chart with EWP count and technical indicators.

NDX 100 Daily Candlestick Chart With EWP Count.
NDX 100 Daily Candlestick Chart With EWP Count.

Figure 1 above shows two EWP options. The first (A) is, per my previous update's option and (red) intermediate wave-iv bottomed March 5 at NDX 12208, and red wave-v is now underway, currently subdividing into a (green) minor-1 and 2. As long as that low holds, this is possible. We need to see a move above the minor-1 high soon to confirm this option. Conversely, a close below today's low targets the next support at NDX 12400. This would increase the possibility of the second option shown in Figure 1B.

(B) The current decline is (red) wave-ii of a large (black) major wave-5. The ideal (green) c=a targets almost exactly the 76.40% retrace of the prior red wave-i, i.e., the October-February rally. A 76.40% retrace is not uncommon for a second wave, and once complete, wave-iii, iv, and v are yet to come (red dotted arrows), targeting well into the NDX 17000s. Please note the difference in where (black) major-4 was between Figure 1A and B. In the latter case, wave-4 was a more complex triangle instead of a simple zigzag. This brings me to Figure 2 below.

Figure 2 C, D. NDX100 daily candlestick chart with EWP count and technical indicators.

NDX 100 Daily Candlestick Chart With EWP Count.
NDX 100 Daily Candlestick Chart With EWP Count.

Figure 2C is the most bearish alternative. The February top is a complete impulse going first back to the late-October 2020 low, then the March 2020 low, then the March 2009 low, and even the 1932 low. After a 90-year bull market, it is not far-fetched to assume the party is over. A close below that 76.40% retrace (NDX 11648 to be exact) increases the odds of this EWP potential because second waves often do not retrace that much of the initial first wave. It is technically still possible, but less likely. Thus, the probabilities then start to shift to the EWP options shown here in Figure 2C. The EWP option from Figure 1B is by then long gone. See how one can check them off one-by-one using this elegant, simple technique? In this case, I expect the NDX to bottom in the red target zone, 10580-11620, depending on the length of the c-wave the market is then in, to complete black wave-a.

Lastly, the "happy" middle-of-the-road option is shown in Figure 2D. The NDX will retest the 12200 level one more time to complete a complex (red) intermediate wave-iv, with (green) minor-c now underway. It will take option A off the table soon, but obviously, the index cannot move below the intermediate-wave-i high (NDX 12187), or it will shift us to either option B or C. Why? Because in an impulse move, the first wave high and fourth wave low are not allowed to overlap. This is only permitted in a diagonal (see here), but I would not bank on such a price structure because there are not many hard rules that govern them and, thus, they are very unreliable.

Bottom line: The NDX is currently at a crossroads. It will choose its path eventually, as markets always know where they have been, are and will be, but it is up to analysts to figure out the latter part. Sometimes that is easier than other times. Right now, the index's future outlook is muddled, but it will show us its hands sooner than later by a subsequent breakout or breakdown above or below critical price levels. And when it does, we have our road maps ready.

NASDAQ 100 Is Currently In Highly Uncertain Territory
 

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NASDAQ 100 Is Currently In Highly Uncertain Territory

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Comments (9)
Gulfstream Five
Gulfstream Five Apr 05, 2021 4:15PM ET
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.....and the 12687.04 retest?
Kevin Gary
Kevin Gary Apr 02, 2021 11:07AM ET
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Thanks a lot Dr for your analysis! It has been invaluable and very profitable!
Gulfstream Five
Gulfstream Five Mar 29, 2021 4:55AM ET
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It's a complicated way of saying that 2D is likely to replace 1A!
Martin Copper
Martin Copper Mar 26, 2021 5:40PM ET
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Hello Mr. Arnout, I would be interested in such analysis of S&P 500 index. Can you do that? Thanks a lot!
Andrew Bevan
Andrew Bevan Mar 26, 2021 5:40PM ET
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I think he offers a more full and lengthy newsletter, Martin, that may be subscribed to. Check out his website if you didn't go there previously.
Quy Nguyen
Quy Nguyen Mar 26, 2021 4:30PM ET
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Thanks Dr
Sumit Bagri
Sumit Bagri Mar 26, 2021 3:05PM ET
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4 options are not helpful. For eg if 12200 breaks, still one does not know whether it's highly bearish option or highly bullish. We need 11640 to break to know that. By introduce Wave 2 of Wave 5 option, it has become all over the place
Andrew Bevan
Andrew Bevan Mar 26, 2021 3:38AM ET
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Just to clarify, chart D is our (your) original worksheet. Chart C is the alternative, if D is derailed. Chart A is a variation of chart D, if the major plan is partly correct. And chart B submits to chart C, if chart D is wrong, but then also following ideas of chart A , because certain options of chart D have been annulled. If readers hold horses and are patient, some answers may be imminent in your next and pending report. Picture unclear, but then the wave 4 we originally were looking for was never due to be constructive.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Mar 26, 2021 3:38AM ET
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Hi Andrew, Chart A is my original worksheet. All others are alternatives. Indeed, now is the time to hold horse and wait for clarity by the markets: breakdowns can become VERY bearish, C, while a breakout is reasonably bullish.
Andrew Bevan
Andrew Bevan Mar 26, 2021 3:38AM ET
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Dr. Arnout ter Schure  Ah, now I see. Yet chart A adds detail (iv-v) to the possibilities of V. This is the way things work, as we go along. I seem to recall V also could be a truncated 5th, so won't let entirely go of that. As you say, the c-wave dips come suddenly and are brutal. In that sense the fundamentals of the V seem risky till well established.
Andrew Bevan
Andrew Bevan Mar 26, 2021 3:38AM ET
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Having understood your charts correctly, I would still suggest that A, being your original analysis, is best and probably most likely option. I am mainly following the Dax, but this has been tending to trigger to the upside ahead of the US markets while we still awaited the US-structure to be resolved. So we shall show caution, yet have reasonable faith. Thanks!
Andrew Bevan
Andrew Bevan Mar 26, 2021 3:38AM ET
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Oh, the current problem being, though, that the Dax may peak (or meet resistance) close 15000. If that does happen, what's that about and what's in it for the NASD100?
John Taylor
John Taylor Mar 25, 2021 11:59PM ET
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That’s an awful lot of words to say absolutely nothing. May as well have just said, “Could go up, could go down, who the f knows?”
Paul Sutton
paulsmith007 Mar 25, 2021 11:59PM ET
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Seriously. 4 options of absolute nothing.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Mar 25, 2021 11:59PM ET
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failure to understand a concept, i.e., that of probabilities of possibilities, does not mean the writer says nothing.
Erik Brucker
Erik Brucker Mar 25, 2021 8:34PM ET
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Spot on
Dr. Arnout ter Schure
Dr. Arnout ter Schure Mar 25, 2021 8:34PM ET
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thank you, at least some people understand probabilities contrary to some of the other comments ;-)
Andrew Bevan
Andrew Bevan Mar 25, 2021 8:34PM ET
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Nature has to be listened to and deciphered. If something is written in a foreign language or code, doesn't mean is without meaning. 👍
 
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