NASDAQ 100 Rally Continues. What’s Next?

Dr. Arnout ter Schure | Jan 29, 2024 19:22

In our last update from two weeks ago, see here, our primary expectations were

either a long-term top (blue W-B) and set course for $8600+/-2000 or
a drop to ideally around $15800+/-200 for the black W-4?, before a final rally to as high as $20000+/-1000 for the black W-5?. Our alternative is
For a mild correction to have ended on January 5, a rally to $ 17414-713 is underway.

Unfortunately, we could not discern between these three potentials back then, but the Nasdaq 100 broke already above its December 2023 high on January 18, and therewith signaling option (C) was underway. Since then, we have successfully tracked the index for our members using a standard Fibonacci-based Elliott Wave Principle (EWP) impulse pattern. See Figure 1 below.

Figure 1. NDX hourly chart with detailed EWP count and technical indicator

In an EWP impulse pattern, we expect the third of a third wave, i.e., orange W-3 of grey W-iii, to reach the 100-123.6% Fibonacci extension, W-4 should then ideally drop to the 100-76.4% Fib-extension, W-5 of W-iii to the 161.8% extension, etc. So far, the index has adhered well to this pattern and should either be in grey W-iv or have already completed it. We don’t know yet at this stage, but we certainly have price levels above or below which we can get an answer to this question. Regardless, an impulse consists of five waves; so far, there have been only three waves since the January 5^th low. Hence, we must expect another grey W-v to ideally $17738-890 once the current minor correction since last week’s high has run its course while staying above critical price levels. Note the grey W-iv typically reaches the 100% Fib-extension level but can also bottom at 123.60% (shallow) or 76.40% (deep). Below the latter, i.e., the orange warning level, increases the odds grey W-v may not materialize.

Namely, the colored dotted lines (blue, grey, orange, and red) subsequently increase the warning levels for the Bulls, which can be used to prevent havoc on one’s portfolio. A drop below the red line from current price levels

Our alternative scenario using the regular NASDAQ is shown in Figure 2 below.

Figure 2. Daily NAS chart with detailed EWP count and technical indicator

Given that the rally from the October 2023 low was essentially straight up with very few down days, besides the five-day decline into the January 5 low, the correct interpretation of the price action from an EWP perspective is not entirely straightforward. As such, the expected high at around NDX17738-890 (NAS15760-920) may also only be green W-3 of red W-v. A pullback to around NDX17100+/-100 and NAS15250+/-100 for the green W-4, followed by another rally for the green W-5, should be anticipated.

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Written By: Dr. Arnout ter Schure

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