Two weeks ago, we cautioned that it was time for the Bulls to be a bit more cautious regarding the NASDAQ 100 based on the interpretation of the price action using the Elliott Wave Principle (EWP). We stated that the index should ideally top out at around $15750+/-100, then drop back to the low $14Ks before staging a rally. We also mentioned that if the index broke below the high at $15277, it would suggest an alternate EWP count.
Fast forward, and the index did not even reach $15750+/-100. Instead, it stalled at $15557 and dropped below the critical $15277 level a day later. This confirms our earlier analysis that, based on the EWP, we can expect at least three waves back up after three waves down.
The current pattern is shown as the green W-a, -b, -c in Figure 1.
Although it was our alternate option, over the last two weeks it has become our preferred analysis. This is because the index dropped below $15277 and the decline from the September 1 high to the September 7 low counts best as five waves lower. The subsequent rally into last week’s high was only three waves. See Figure 2 below.
Our preferred path now is for the completion of the red W-iv as an expanded flat, with the green W-c underway. This means that the grey W-iii, iv, and v of W-c of W-iv should begin soon.
It’s important to note that our analysis is always subject to change as we learn more about the market. A break above $15600 would suggest a different scenario, specifically a Bullish Ending Diagonal (ED) targeting the $16750s. But for now, we consider that an insurance policy in case our preferred assessment is wrong. Lastly, we are tracking two other bearish possibilities, but due to the length limitations of this article, we cannot share them at this stage.