For those who are fresh to our Elliott wavebased on analysis and as a reminder to our regular readers, we have been tracking the ending diagonal (ED) pattern for the NASDAQ100 (NDX) for over a month. IN our previous updatewe found it
“the index rose to its minimum growth target [123.60% @ NDX21509] for the extension of the third wave within the final diagonal pattern. However, while downside risks are therefore currently increasing and appropriate actions need to be taken, such as raising stops and taking partial profits, until we see at least a break below NDX21200, we can still afford higher prices… red extension of 138.20% on NDX21868… A break below this level, especially the (orange) 3rd warning level on the NDX20600, will tell us that the red W-iv is perfectly NDX20000-20300 is in progress.“
Fast forward: after our update, the index did not fall below NDX21200, but remained at NDX22133 through December 16, thus slightly above the $21,868 level. However, FED Wednesday, December 18, erased the previous ten days of gains. After continued growth, we have already increased the warning levels for our Premium members to NDX21600 and therefore no harm has been done.
The index bottomed on December 20 at NDX20913 and has reached the perfect green Wb target zone from which it was rejected today. See Figure 1 below
Figure 1. NDX daily chart with detailed Elliott wave number and technical indicators
So the expected red W-iii peak has come and gone and the index should now be in red W-iv. Given that it peaked exactly in the ideal reflection target zone (green Wb), we expect it to reach NDX20300-600 for green Wc red W-iv as shown. It is essential to note that these levels are in line with what we had already predicted at the end of November, which shows the predictive power that can be gained by using EW.
So, provided it stays at least below yesterday’s high on NDX21837, and especially below the recent all-time high on NDX22133, we should expect the index to bottom out near the NDX20300-600 level for the red W-iv before it can start another more significant red augment in Wv, ideally up to NDX22825-23400.
