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NASDAQ 100 Update: How Much More Downside To Come?

By Dr. Arnout ter Schure Stock MarketsSep 15, 2020 01:52PM ET
www.investing.com/analysis/nasdaq-100-update-how-much-more-downside-to-come-200537629
NASDAQ 100 Update: How Much More Downside To Come?
By Dr. Arnout ter Schure   |  Sep 15, 2020 01:52PM ET
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Two weeks ago, on Sept. 1, it seemed the markets would never go down. And I explained why the Nasdaq 100 moved higher than what can be anticipated based on standard Elliott Wave Principle (EWP) wave-relationships and Fibonacci-extensions. I warned about the increasing downside risks. See my article here.

I concluded:

Thus, as all ‘regular’ upside targets have been breached, we now need to set sail for the next higher Fib-extension targets: grey box at $12846-12860 … and with the new price data at hand I update the [risk/reward ratio] R/R to 15-20% / 1.5-4.5%. Why such a high risk? Because the index is currently, in my humble opinion, in an extended 5th wave, and those are often fully retraced during the next correction.

Fast forward, and the NDX topped at $12439 on Sept. 2, one day after my update, adding 1%. It then staged its fastest 10% drop in its history the following three trading days, erasing more than one-month's worth of gains. Thus, my updated target zone and risk/reward ratio were correct.

Figure 1.

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

After the three-day drop, I told my Premium Major Market members to expect a bounce back to $11580-11905 before the next leg lower would kick in (green wave-b and c; respectively). The green b-wave did what it did, but the anticipated leg lower (green wave-c) failed to reach its ideal target of $10500-10000. The market had different plans. Yes, I do not, and cannot, know all twists and turns beforehand because we are dealing with probabilities of possibilities and not with certainties. It bottomed last Friday, and since staged its best rally since Sept. 2. Thus a larger bounce is now under way to ideally $11505-11860. From there, I expect the next leg lower (red “c?”) to complete larger (black) wave-4. Wave-5 kicks should then rally the index back to new all-time highs and to complete the bull that started in 2009 in the spring of 2021. (See my recent article here explaining why.)

Bottom line. The current market environment remains the same as over the last few years: overextended rallies followed by fast-and-furious corrections. Thus, traders have to stay vigilant; resist the urge to chase, aka FOMO (Fear Of Missing Out); scale-out of longs, aka sell into strength; and raise their stops continuously to protect remaining profits. Besides, EWP and classic technical analyses (TA) need to be continually relied on for trading decisions. No technique or tool gets the right answer about the markets’ next move all the time. But EWP combined with TA is right often enough to allow for sound, safe and informed trading. My Premium Major Market Members are well-aware of these facts and use my forecasts wisely.

The NDX should now be in a larger bounce, which has likely not yet run its course as long as the index stays above Friday’s low.

Corrections (of corrections) are tricky and even more challenging to forecast than a five-wave impulse. Still, as long as the NDX stays below $12250, I expect the current counter-trend rally to fizzle out in the red target zone. After that, it should work its way lower into, preferably, the pink target zone ($10000-10500). But, as we have seen over the last few weeks, in Bull markets, “upside surprises and downside disappoints.” So, please do not be surprised if only the black target zone at $10250-10750 is reached for the larger wave-4.

NASDAQ 100 Update: How Much More Downside To Come?
 

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NASDAQ 100 Update: How Much More Downside To Come?

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Comments (11)
king michael
king michael May 10, 2021 5:30PM ET
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Tech is going to keep crashing as the government has been working so hard to bring manufacture back to ***the very limited capital and talent pool needed by advanced tech sectors.
Gordan Flego
Gordan Flego Sep 16, 2020 5:01AM ET
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160024689010153.jpg
As I think that pullbacks are healthy and NASDAQ is due to the one, I think that if have daily close again in the uptrend channel it will go up. This what is bellow channel support that will be false break, and those always leads to opposite rally.  Also, we cannot ignore two big fundamental issues here, FED support and vaccine for C19. FED is constantly supporting stocks and vaccine will produce extended positive rally.
PM Coffee
PM_Coffee Sep 15, 2020 11:23PM ET
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Curious what your perspective is on the dollar as that imo appears to be the main driver of rallies and pullbacks occurring at this particular time.
Iron Man Stock
Iron Man Stock Sep 15, 2020 10:32PM ET
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In short term, there is only upsides risk.
Gershom Zvi
Gershom Zvi Sep 15, 2020 9:50PM ET
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News is a trygger as well
Fabio falec
falec Sep 15, 2020 7:15PM ET
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Thanks for the analysis.
Kenneth Hom
Kenneth Hom Sep 15, 2020 6:05PM ET
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Nobody knows
Dr. Arnout ter Schure
Dr. Arnout ter Schure Sep 15, 2020 6:05PM ET
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Correct, and I agree. nobody knows with absolute (100%) certainty when and where the markets will top or bottom exactly. But one has many tools available to make an expert, well-educated, estimate with an acceltable high-degree of certainty when and where that top/bottom could be. That’s all one can do.
Mike Lee
Mike Lee Sep 15, 2020 5:57PM ET
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Thanks for your article.  Always like reading your analysis.  cheers
Stefon Walters
AgapeGrace Sep 15, 2020 5:57PM ET
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Your EWP “revised” (after it failed the first 11800 target) forecast said top was now 12800s but then only reached 12400s. Yet of course you proclaim “Thus, my updated target zone and risk/reward ratio were correct.” Uh no, not correct ... again. This is another case of “moving the goal post” with hindsight to make your EWP perpetually “correct”. EWP wizardry is inactionable. Don’t care to hear more “explanations”. Thank you but moving on.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Sep 15, 2020 5:57PM ET
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If my work is so bad, why bother reading it and even taking the time to write negative remarks? Just move on, please. nobody gets any better from nonconstructive, complaining, fail-to-understand-the-concept-of-dynamic-markets, negativity. Thank you.
Mats Tjernberg
Mats Tjernberg Sep 15, 2020 5:57PM ET
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As I see it, the important message was that the index was near the end of 3. And that the risk was at the downside. A person who bet further bull up to 12800 took a high risk. I took bear positions att 11800 and 12300 and was well rewarded.
Dark Side of the moon
Dark Side of the moon Sep 15, 2020 1:59PM ET
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Always a great analysis Dr. Thanks.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Sep 15, 2020 1:59PM ET
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thank you
Dennis Obrien
Dennis Obrien Sep 15, 2020 1:58PM ET
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good input
 
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