The day before Russia’s unfortunate invasion of Ukraine, when trading at $13,500, I found using the Elliott Wave Principle (EWP):
The major wave 4 correction is close to completing its complex pattern is heading lower, and while $13,454-13,111 is ideal, the index has reached low enough ($13,720) to consider a longer-term low in place. A break above $15,200 would confirm that a larger fifth wave to $18,000 is underway, a serious warning for bears above $14,700.
The index bottomed out at $13,065 on February 24, then rebounded before retesting that low on March 14 (NDX 13,020). Now, it’s back above $14,000. Therefore, my downside forecasts are only down 0.35% and 0.69%, respectively.
Although very close to perfection, many people expect certainty and perfection in a probabilistic and imperfect world, leading to misunderstanding and frustration. This is especially true during corrections, which are always complex price patterns with a lot of overlap, IEMove up and down in rapid succession.
Nothing can be done about it. One has to see the forest, not just the trees. Stay away from short-term, always volatile, corrections. They separate professionals from amateurs. This, in turn, leads to lower short-term certainty and lower confidence forecasts.
Failure to understand that this is not a reflection of the EWP. So, back in June of last year, my big-picture view remains firm that wave 4 is probably done and wave 5 to NDX 18000+ is underway.
Figure 1: Nasdaq 100-day candlestick chart with detailed EWP counts and technical indicators.
I adjusted the EWP count slightly to account for the March 14th and February 24th lows. But that doesn’t change the overall picture. That is, a large wedge pattern has formed, and all technical indicators are showing positive divergence.
similar to (see ). All of this suggests that the index is ready to rally to the start of the wedge and eventually higher. The current three-day rally should only be part of wave i of wave 5.
Three weeks ago, I was looking for an ideal price drop to $13,454-13,111. NDX achieves this in a two-step process (the variability of complex corrections is welcome). On February 24, the index bottomed at $13,065, having fallen to $13,020 three days earlier. It is now priced above $14,000 and has broken out of a bullish wedge formation. This diagonal pattern targets around NDX 15,000, which should be the initial uptick from larger wave 5 to NDX 18000+. I expect a multi-day pullback before the start of the third wave of wave 5 (the second wave of wave 5).
All in all, as long as the Feb. 24 low holds (which I think is pretty solid), the index is in the beginning stages of a multi-month rally to NDX 18000.