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While we have been monitoring the NASDAQ 100 (NDX) to reach approximately 26680 in an impulse (five-wave) move upward from the early April lows for a more significant top for some time, in our previous update from October 3, see here, we found that, according to the Elliott Wave (EW) Principle, the index would first experience a (4th wave pullback):
“We can allow one smaller (orange) Wave-5 to reach as high as ~25300, but it is no longer necessary, and that would be like picking up pennies in front of a steam train … as the green W-4 is inevitable … since in bull markets the downside disappoints and the upside surprises … a drop to … 23270-23830 is more likely. From there, we can expect one last fifth wave, the green W-5, to target a point close to the ideal black 161.80% Fibonacci extension, approximately 26680, which is also the green 376.4% extension—a typical extended fifth-wave target—at 26565."
Figure 1. Our preferred short-term Elliott Wave count for the NDX.
Fast forward, the index peaked at 25195 on October 10, dropped to 24256 on October 14, and started making new all-time highs (ATHs) last Friday, October 24. Therefore, the index peaked as expected but did not reach the ideal W-4 target zone. As we stated, in bull markets, downside disappoints!
A fifth wave generally matches the length of the first wave. Since (green) W-1 was 2384 points, we can estimate a target of 24256 +2384 = 26640 for the green W-5, which is divided into five smaller (gray) waves. The 5=1 target aligns well with our long-standing target of approximately 26680. Once reached, the probability of a 2022-like bear market increases. See Figure 2 below.
Figure 2. Our preferred long-term Elliott Wave count for the NDX.
Since we count down weeks as 2nd- and 4th-wave off the April low, the not-as-deep-as-expected down week ending October 10 can be assessed as the green W-4. The warning levels for this wave count, which have consistently helped our readers stay on the right side of the markets by enabling us to remain long with minimal concerns, have been raised as the NDX moved higher.
The daily chart, the short-term, specifically applying to the green W-5, now has the following warning levels: first at 25864 (blue, 25% chance that the green W-5 is over), second at 25656 (gray, 50% chance that the green W-5 is over), third at 25195 (orange, 75% chance that the green W-5 is over), and fourth at 24652 (red, indicating that the green W-5 is definitely over).
The weekly chart, the intermediate-term, i.e. applying to the black W-3, has the levels set at: first at 25656 (blue, 25% chance that the W-3 is over); second at 24652 (gray, 50% chance that the W-3 is over); third at 24256 (orange, 75% chance that the W-3 is over); and fourth at 22673 (red, W-3 is definitely over).