Nasdaq 100 May Need to Dip Before Rallying Again
Dr. Arnout ter Schure | Dec 02, 2022 13:53
Two weeks ago, see Elliott Wave Principle (EWP) ,
"… the general path laid out in late October remains our focus and is filling in rather well. Once black W-a tops (ideally around $12-12.6K), I still expect a sizable pullback first (W-b) to ideally $11.2K +/- 200 before the next rally (W-c) starts to ideally $13.8-15.4K. I can narrow this target zone down once more price data becomes available."
After two weeks of sideways consolidation, the index broke higher on Powell's speech on Wednesday and reached $12115 yesterday, only to drop lower on better than expected jobs report today. As the saying goes, "The market giveth, the market taketh away." The index is only 1.7% higher since my last update, so the question is: where does all this whipsawing lead us?
See figure 1 above. My primary expectation is that the index topped yesterday for an irregular b-wave of an irregular flat in EWP terms (see example here ). It should now be working on the final (red) c-wave lower to ideally $11300-11600 for the larger black W-b before the next rally (black W-c of blue W-B) to ideally $13.8-15.4K starts. The technical indicators look slightly tired, with negative divergences (dotted orange line), and ready to move lower. But that is a condition, not a signal.
Namely and however, if the bears cannot muster a breakdown, then the alternative option I am tracking becomes operable. In that case, a more immediate five-wave rally to ideally $13.2+/-2K will become the primary path. See figure 2 below.
Figure 2.
Just as a reminder, while some misunderstand the EWP and my work, claiming that I'm saying the market will either go up or down, I only look at it from the perspective of probabilities because there are no certainties. Therefore, everything has to be approached with "if/then" views. I provide those perspectives by ranking probabilistic movements based on the structure of the price action. I offer a primary EWP perspective, and if that pattern breaks due to the price breaking above or below a certain level, it tells us that the assessment was wrong. The alternative EWP option is then operable. In a probabilistic environment, there's never one option. If there were, then it would not be a probabilistic environment but a certainty. This approach is like an army general preparing a primary battle plan and, simultaneously, a contingency plan if the initial battle plans do not work. We prepare for battling the markets in the same manner.
h2 Bottom Line/h2
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Two weeks ago, we found that:
"The general path laid out in late October remains our focus and is filling in rather well. Once black W-a tops (ideally around $12-12.6K), I still expect a sizable pullback first (W-b) to ideally $11.2K +/- 200 before the next rally (W-c) starts to ideally $13.8-15.4K. I can narrow this target zone down once more price data becomes available."
After two weeks of go-nowhere price action, the NDX finally reached the ideal target zone yesterday. It topped at $12,1K. Today's decline should be the initiation of the final decline to that W-b target zone before W-c starts. That is the primary battle plan. Our contingency plan is that on a more immediate breakout above yesterday's high, we will look for the index to reach $13.2+/-2K without a more significant pullback.
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