Three weeks ago, I showed how the NASDAQ 100 had broken out from a potential bullish wedge that was forming and how it was holding the breakout. I highlighted this pattern and its associated upside potential in late June. See figure 1 below.
Figure 1: NASDAQ 100 daily candlestick chart with detailed EWP count and technical indicators:
In mid-July, I found “a breakout above the late June and early July bounce high levels of about $12,300 will target $12,900. A breakout above the latter level can allow the NDX to target $15,000. More upside is supported, with the technical indicators all pointing up and on a buy (green dotted arrows).”
The bulls did not disappoint. The index broke out, retested the breakout and now sits at $13,000+, an increase of just under 14%.
Remember comments back then were essentially negative and disapproving, ranging from “I guess the wedge will not be broken” to “technical analysis is worthless.”
Of course, I do not get it consistently right. Nobody does. So let's move on.
In this case, the index and my analyses proved the negative sentiment-driven opinions wrong. In other words, please do not follow the emotional hype de jour. Instead, focus and trade the setup in front of you. I did, and my returns speak volumes. (See here).
That said, there are now enough scribbles in place to assign a high-probability Elliott Wave Principle (EWP) count to the price action since the June 15 low. See Figure 1 above.
It appears the index is forming a motive wave off that low, but instead of an impulse, it could morph into a leading diagonal. So far, there are only three waves up (green c/3?). But we want to see five waves because three waves are only part of a corrective bounce. The index should ideally hold last Tuesday’s low (around $12,100) to allow for a five-wave pattern (green 4, 5 of red a/i). Once we see that, the subsequent more significant pullback (b/ii) will be a great buying opportunity for c/iii.
Meanwhile, please remember the thrusts I alerted to supporting the notion of higher prices over the longer term.