I would like to continue my Elliott Wave Principle (EWP) series about the NASDAQ 100 (NDX) by starting off with a quote as I have done before. It is by the Indian yoga guru, Maharishi Mahesh Yogi:
“When the elephant decides to walk through the village, all the dogs come out and bark.”
Source: Wikipedia
That said, I see no reason to change my POV only to fine-tune it as more price data becomes available. Namely, I have had the following EWP-based roadmap since June last year (!): top at around $15-16K, drop to ~$14.5K, then rally again to $17-18K. See my post and subsequent article, for examples.
And that roadmap has, so far, panned out well: the NDX reached $16.8K in November last year; the index currently sits at $13870. Thus, I continue to expect the rally to new all-time highs. Two weeks ago, I discussed how the NASDAQ 100 had two options (A, B) with the shorter-term bearish path:
"the NDX can still try for a last stab lower to NDX13600+/-300 to complete a more significant 4th wave, but IMHO it will have to drop below NDX14080 to confirm this option, with a severe warning below NDX14300.
"… by diligently tracking the price action over the next few days, I will know soon enough which door, A or B, the market will go through."
The index dropped below $14300 last Thursday, thus giving us the severe warning that it was on the lower odds path. As such, the chart below shows the updated preferred path towards $13600+/-300 using the ideal, Fibonacci-based, EWP impulse pattern for this (green) minor wave-5 of (red) intermediate wave-c of (black) major-4.
NASDAQ 100 daily candlestick charts with detailed EWP count and technical indicators
The break below NDX14300 already led the index to reach the red downside target zone I had put on the chart two weeks ago. So far so good. I have added the Fibonacci-extensions of (green) minor wave-1, measured from the minor wave-2 top to the chart and (green) wave-3—the Jan. 24 low—bottomed almost exactly at the ideal 161.80% extensions.
Wave-4 then decided to bounce above the ideal, typical, 100% Fib-extension by tagging the 62.80% level. As such, wave-4 and wave-1 slightly overlapped, turning the larger (red, intermediate) wave-c of the even more significant (black, major wave-4) into an ending (Expanding) diagonal. Albeit not shown here, the NASDAQ Composite had no such overlap and is still following along an almost picture-perfect impulse pattern lower.
Thus, the major wave-4 correction is close to completing its complex pattern, called an expanding flat in the EWP. Namely, because (green) minor wave-4 gave the markets more than they bargained for, wave-5 may not reach its ideal downside target (green box at the 176.40-200.00% extensions: $13454-13111).
However, the markets do not owe us anything and thus we must be aware that a significant bottom can be struck any day now. Especially considering potential positive divergence is developing between the technical indicators and price (dotted black arrows).
Bottom line: The roadmap I outlined many months ago continues to be a good guide regarding the NDX’s bigger picture moves. Although the near term is always fraught with more variability, two weeks ago I said the index could
"still try for a last stab lower to NDX13600+/-300 to complete a more significant 4th wave, but IMHO it will have to drop below NDX14080 to confirm this option, with a severe warning below NDX14300."
It appears this move lower is underway and although $13454-13111 would be ideal, the index has already reached low enough ($13720) to consider a longer-term low is in place. All it now requires is a move back above $15200 to confirm the larger 5th wave to $18000 is underway, with a serious warning for the bears above $14700.