On March 18, my NASDAQ 100 update based on Elliott Wave Principle (EWP), showed the index had most likely bottomed for a more significant fourth wave and was in the early stages of the preferred rally to 18,000+. In late February, I was looking for a move lower to $13,454-13,111, which was reached in a two-step process: In late February, the index bottomed at $13,065 and in mid-March at $13,020. I then showed the index was “breaking out from a bullish wedge pattern," explaining: "This diagonal pattern targets around NDX 15,000, which should be the initial move up for the larger wave-5 to NDX 18,000+. From there, I expect a multi-day pullback (wave-ii of 5) before wave-iii of 5 gets going.”
Although nobody can forecast every market move correctly, those who focus on the forest and not the trees and accept the inherent variability of corrections know “my big picture view remains steadfast in that major wave-4 has likely been completed, and major-5 to NDX 18,000+ is under way.” So let’s see where things are now as the NDX has tagged on another 400p (2.8%) since last, week supporting my bullish thesis.
Figure 1 NASDAQ 100 daily candlestick charts with detailed EWP count and technical indicators.
The daily chart does not capture the (green) minor wave-1 high made on March 16, but it was the intra-day high before that day’s Fed announcement. The subsequent intra-day low was wave-2, and the index has reached the ideal, Fibonacci-based wave-3 target zone. Of course, the NDX does not have to follow the perfect path, but if it does, we should see a short-term pullback for wave-4 to around $14,250+/-50 and then a wave-5 to ideally $15,150+/-50. That would then complete (red) intermediate wave-i of (black) major-5. Besides, it would fulfill the bearish wedge’s “destiny”: NDX 15,000. When a technical pattern and the EWP match, it is a potent combination that will most likely come to fruition. Besides, having this kind of foresight at one’s disposal is tremendously powerful. What does it take to invalidate that setup? A daily close below $14,100.
Bottom Line: The NDX reached my downside target zone of $13,454-13,111 in a two-step process (late February $13,065 and mid-March $13,020). It broke out from a bullish wedge pattern, which I showed would target $15,000. The index has rallied another 2.8% since my previous update, supporting my bullish thesis and the technical pattern. Assuming the NDX will adhere to the ideal Fibonacci-based impulse pattern (it doesn’t have to and can melt up with just minor pullbacks along the way, similarly to the rally after March 2020). We should see a brief pullback soon to ~$14,250+/-50 and then a rally to $15,150+/-50 ideally. A longer and deeper correction should start before the real melt-up to NDX 18,000+ gets going. It will take a daily close below NDX 14,100 from current levels, i.e., without reaching $15,000+ first, to suggest this will not happen. But that is my alternate scenario.