Since early April, there has been a consistent bullish sentiment towards the stock market, with a particular focus on the NASDAQ100 (NDX). This optimism wasn’t unfounded; it was grounded in the meticulous analysis of price data, using the Elliott Wave (EW) Principle as a guide. According to this analysis, the NDX was projected to hit a peak of roughly $21400, signaling an (orange) Wave-3 culmination. This peak would be followed by a decline to the $20800 (+/-100) region, denoting a potential (orange) Wave-4, with a subsequent rally anticipated to push the index to around $22000 (+/-200) for a Wave-5 of a grey W-iii/c phase. This insightful prediction has been remarkably accurate, with the NDX reaching a peak of $21483, then dipping to $20778 in May, and now trading at approximately $21785.
The complexity of the stock market’s movements, particularly within the NASDAQ100, is further illustrated through the subdivision of the orange 5th wave into an overlapping ending diagonal (ED). This specific pattern revealed that last week, the blue Wave-iii likely reached its zenith at $22041, while the blue Wave-iv saw a decline to $21591 by Friday. These movements were well within the projected target zones, demonstrating the sophisticated understanding of market dynamics held by those employing the Elliott Wave Principle. Currently, the index seems to be in the midst of the blue Wave-v, conditional to it maintaining levels above certain critical thresholds, referred to in this analysis using a colour-coded system. The first warning level, depicted in blue at $21730, acts as an initial signal, or “radar lock”. Should the index dip below this, it moves into the grey zone at $21472, considered a “shot across the bow”. An orange warning at $21199 follows this, and should the index fall further to the red zone at $20032, it would indicate a significant downturn, prompting a shift to an alternative EW count.
However, the use of ending diagonals (EDs) comes with its own set of challenges due to their overlapping patterns, which can sometimes make forecasting less reliable. As illustrated in the analysis, the index indeed peaked close to the orange 200.0% Fibonacci extension at $21964, slightly below the anticipated $22041. Additionally, the grey 161.80% Fibonacci extension at $22237, a typical target for a W-iii/c phase, was nearly reached. This suggests that the completion of the orange W-5 of the grey W-iii/c might have just occurred. According to this trajectory, the NDX is poised to adjust towards the grey W-iv, ideally situated around $20995, before ideally rallying towards its 200.0% Fibonacci extension at approximately $23095.
Understanding the intricate flow of the market’s waves is essential for setting realistic expectations and strategies within the tumultuous realm of stock trading. This is particularly true when utilizing the Elliott Wave Principle, where identifying the most profitable wave formations, a third wave or a C wave, becomes a crucial aspect of the trading strategy. Currently, it appears that we are witnessing the conclusion of the third or C wave (grey W-iii/c), heralding a pivotal moment in the market’s rhythm.
As we progress, the task of forecasting becomes increasingly challenging, especially as the NASDAQ100 embarks on completing its final 4th and 5th waves. Yet, despite the Elliott Wave Principle being inherently price-based, the utilization of warning levels offers a strategic way to gauge the market’s forthcoming direction. Should the index breach below $21199, attention will be directed towards the $20935 marker. Conversely, if the index remains buoyant above the previous week’s low of $21591, there’s potential for it to climb to between $22275 to $22530 before embarking on the next corrective phase – the grey W-iv.
In summary, the application of the Elliott Wave Principle in analysing the NASDAQ100’s recent activities reveals not only the precision that can be achieved through such analysis but also underscores the inherently volatile nature of the stock market. This approach offers traders and investors alike a structured method to navigate the uncertainties of the market, enabling more informed, strategic decision-making grounded in the intricacies of market wave movements.
